[Federal Register Volume 60, Number 66 (Thursday, April 6, 1995)]
[Proposed Rules]
[Pages 17466-17487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8205]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 60, No. 66 / Thursday, April 6, 1995 /
Proposed Rules
[[Page 17466]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 981
[Docket Nos. AO-214-A7; FV93-981-1]
Almonds Grown in California; Recommended Decision and Opportunity
To File Written Exceptions to Proposed Further Amendment of Marketing
Agreement and Order No. 981
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule and opportunity to file exceptions.
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SUMMARY: This recommended decision invites written exceptions on
proposed amendments to the marketing agreement and order for almonds
grown in the State of California. The proposed amendments would: Amend
five existing definitions in the order; revise board representation,
nomination procedures, terms of office, quorum and qualification
procedures, voting and tenure requirements; modify creditable
advertising provisions; revise volume control procedures; require
handlers to maintain records in the State of California; authorize
interest or late payment charges on assessments paid late; provide for
periodic continuance referenda; authorize exemptions for organic
almonds from certain program requirements; and make necessary
conforming changes. These proposed amendments are designed to improve
the administration, operation and functioning of the California almond
marketing order program.
DATES: Written exceptions must be filed by May 8, 1995.
ADDRESSES: Written exceptions should be filed with the Hearing Clerk,
U.S. Department of Agriculture, room 1079-S, Washington, DC 20250-9200,
Facsimile number (202) 720-9776. Four copies of all written exceptions
should be submitted and they should reference the docket numbers and
the date and page number of this issue of the Federal Register.
Exceptions will be made available for public inspection in the Office
of the Hearing Clerk during regular business hours.
FOR FURTHER INFORMATION CONTACT: Kathleen M. Finn, Marketing
Specialist, Marketing Order Administration Branch, Fruit and Vegetable
Division, AMS, USDA, room 2523-S, Washington, D.C. 20250-0200;
telephone: (202) 720-1509, or FAX (202) 720-5698; or Martin Engeler,
Assistant Officer-In -Charge, California Marketing Field Office,
Marketing Order Administration Branch, Fruit and Vegetable Division,
AMS, USDA, 2202 Monterey Street, suite 102-B, Fresno, California 93721;
(209) 487-5901 or FAX (209) 487-5906.
SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice
of Hearing issued on August 3, 1993, and published in the August 17,
1993, issue of the Federal Register (58 FR 43565).
This administrative action is governed by the provisions of
sections 556 and 557 of Title 5 of the United States Code and,
therefore, is excluded from the requirements of Executive Order 12866.
Preliminary Statement
Notice is hereby given of the filing with the Hearing Clerk of this
recommended decision with respect to the proposed further amendment of
Marketing Agreement and Order No. 981, regulating the handling of
almonds grown in California, and the opportunity to file written
exceptions thereto. Copies of this decision can be obtained from
Kathleen M. Finn or Martin Engeler whose addresses are listed above.
This action is issued pursuant to the provisions of the
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601
et seq.), hereinafter referred to as the ``Act,'' and the applicable
rules of practice and procedure governing the formulation of marketing
agreements and orders (7 CFR part 900).
The proposed amendment of Marketing Agreement and Order No. 981 is
based on the record of a public hearing held in Modesto, California, on
November 3, 4 and 5, 1993. Notice of this hearing was published in the
Federal Register on August 17, 1993. The notice of hearing contained
several proposals submitted by the Almond Board of California (Board),
which locally administers the order, and other interested parties.
The Board's proposed amendments would: (1) Increase its membership
by two positions and change Board nomination, selection, and operation
procedures; (2) change the term of office of its members from one to
three years, and limit the tenure of Board members; (3) change the
definitions of ``cooperative handler,'' ``to handle,'' ``settlement
weight,'' ``crop year'' and ``trade demand''; (4) require handlers of
California almonds to maintain program records in the State of
California; (5) change its advertising assessment credit program to
allow credit for certain advertising costs incurred by handlers not
previously authorized; (6) require handlers to pay interest and/or late
payment charges for past due assessments; (7) provide for continuance
referenda every five years; (8) require handlers to submit grower
lists; and (9) allow multi-year contracting.
Five persons submitted additional proposals related to continuance
referenda, Board composition and nomination procedures, organic
almonds, regulatory provisions, advertising and promotion, assessments,
compliance audits, the definition of grower, and research and reserve
operations.
At the hearing, Mr. Brian C. Leighton, on behalf of Cal-Almond,
Inc., withdrew five of his proposals that were listed as proposal
numbers 27, 30, 32, 33, and 38 in the Notice of Hearing. In addition,
there was no evidence provided with respect to proposal numbers 42, 43,
and 45 as listed in the Notice of Hearing. Therefore, these proposals
are not included in this Recommended Decision.
The Notice of Hearing also included proposals by the Fruit and
Vegetable Division, Agricultural Marketing Service (AMS), U.S.
Department of Agriculture, to make such changes as are necessary to the
order, if any or all of the above amendments are adopted, so that all
of its provisions conform with the proposed amendment. The Department
also proposed that continuance referenda be conducted on a periodic
basis consistent with the Department's policy guidelines.
At the conclusion of the hearing the Administrative Law Judge fixed
February 28, 1994, as the final date for interested persons to file
proposed [[Page 17467]] findings and conclusions or written arguments
and briefs based on the evidence received at the hearing. The following
persons submitted documents: Mr. Robert J. Crockett, Attorney for the
Board; Ms. Suzanne Vaupel, Attorney representing several organic almond
growers; and Mr. Steven W. Easter, Vice President of Blue Diamond
Growers.
Small Business Considerations
In accordance with the provisions of the Regulatory Flexibility Act
(RFA), the Administrator of the AMS has determined that this action
would not have a significant economic impact on a substantial number of
small entities. Small agricultural producers have been defined by the
Small Business Administration (SBA) (13 CFR 121.601) as those having
annual receipts of less than $500,000. Small agricultural service
firms, which include handlers regulated under the order, are defined as
those with annual receipts of less than $5,000,000.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions so that small businesses will not be
unduly or disproportionately burdened. Interested persons were invited
to present evidence at the hearing on the probable regulatory and
informational impact of the proposed amendments on small businesses.
The record indicates that handlers would not be unduly burdened by any
additional regulatory requirements, including those pertaining to
reporting and recordkeeping, that might result from this proceeding.
During the 1993-94 crop year, approximately 115 handlers were
regulated under Marketing Order No. 981. In addition, there were about
7,000 producers of almonds in the production area. The Act requires the
application of uniform rules on regulated handlers. Marketing orders
and amendments thereto are unique in that they are normally brought
about through group action of essentially small entities for their own
benefit. Thus, both the RFA and the Act are compatible with respect to
small entities.
The proposed amendments to the marketing agreement and order
include changes to five definitions in the marketing order. These
definitions are cooperative handler, to handle, settlement weight, crop
year, and trade demand. The changes that are proposed to the
definitions are intended to make them consistent with current industry
practices. The proposed changes to the definitions are designed to
enhance the administration and functioning of the marketing order to
the benefit of the industry.
The proposed amendment to revise Board representation would
increase the Board's size by allowing two additional grower members to
serve on the Board. This would increase grower representation on the
Board from five to seven and allow more grower input into Board
decisions. The quorum size would also be increased to correspond with
the increase in Board size. The change to the nomination procedures
would require Board nominees to be nominated by January 20 rather than
April 20 as currently provided. This would ensure that the new Board is
seated prior to meetings where important decisions are made for the
following crop year. These proposed amendments are designed to improve
grower representation on the Board and allow the Board to function more
efficiently.
The proposed amendment to change the Board members' term of office
from one-year to three-year staggered terms would allow more continuity
on the Board. This would allow the Board to focus more on long-term
strategic goals and develop long-term approaches to problems in the
industry.
The proposed amendment to require those persons nominated to the
Board to qualify prior to their selection to the Board is an
administrative change. This change would allow the selection process to
take place in a more timely manner. The proposed amendment to add
tenure requirements for Board members would allow more persons the
opportunity to serve as members on the Board. It would provide
opportunity for new ideas and approaches to issues that the Board
addresses each year.
The proposed amendment to the creditable advertising provisions
would provide for expansion of the promotional activities for which
handlers may receive credit-back from their assessments. This would
allow the Board to increase program flexibility for participating
handlers.
The proposed amendment to allow the settlement weight for unshelled
almonds to be determined on the basis of representative samples would
be more consistent with current industry practices. There would be no
increase in burden on handlers expected from this proposed amendment.
The proposed amendment to require handlers to maintain records in
the State of California would improve the Board's administration of the
program. It would also allow the Board to have the records available to
them for compliance purposes. It is not expected that any additional
costs would be incurred by handlers to comply with this amendment.
The proposed amendment to add interest or late payment charges on
assessments paid late would encourage handlers to pay their assessments
on time. Assessments not paid promptly add an undue burden on the Board
because the Board has ongoing projects and programs funded by
assessments that are functioning throughout the year. The addition of
such a penalty is consistent with standard business practices.
The proposed amendment to provide for periodic continuance
referenda would allow growers the opportunity to vote on whether to
continue the operation of the almond marketing order.
The proposed amendment to allow handlers to sell their reserve
almonds and the accompanying reserve obligation to other handlers would
help facilitate the operation of the reserve program by providing
handlers more flexibility.
The proposed amendment to exempt organic almonds from certain
program requirements would provide the organic segment of the industry
more flexibility in marketing and selling their product. The proposed
amendment would authorize organic almond handlers to be exempt from
reserve requirements and advertising assessments. Organic growers and
handlers demonstrated at the hearing that certain current marketing
order provisions do not take into account marketing differences between
certified organic almonds and conventional almonds.
All of these changes are designed to enhance the administration and
functioning of the marketing agreement and order to the benefit of the
industry. Accordingly, the Administrator of AMS has determined that the
proposed revisions of the order would not have a significant economic
impact on handlers and growers.
The amendments proposed herein have been reviewed under Executive
Order 12778, Civil Justice Reform. They are not intended to have
retroactive effect. If adopted, the proposed amendments would not
preempt any State or local laws, regulations, or policies, unless they
present an irreconcilable conflict with the amendments.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file with the Secretary a
petition stating that the order, any provision of the order, or any
obligation imposed in connection [[Page 17468]] with the order is not
in accordance with law and requesting a modification of the order or to
be exempted therefrom. A handler is afforded the opportunity for a
hearing on the petition. After the hearing the Secretary would rule on
the petition. The Act provides that the district court of the United
States in any district in which the handler is an inhabitant, or has
his or her principal place of business, has jurisdiction in equity to
review the Secretary's ruling on the petition, provided a bill in
equity is filed not later than 20 days after date of the entry of the
ruling.
In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C.
35), the reporting and recordkeeping provisions that are included in
the proposed amendments would be submitted to the Office of Management
and Budget (OMB). The provisions would not be effective until receiving
OMB approval.
Material Issues
The material issues of record addressed in this decision are as
follows:
(1) Whether to revise the existing definition for ``cooperative
handler'';
(2) Whether to revise the existing definition for ``to handle'';
(3) Whether to revise the existing definition for ``settlement
weight'';
(4) Whether to revise the existing definition for ``crop year'' and
to change the date that handler carryover and reserve inventory is
reported to the Secretary to be used in fixing the salable and reserve
percentages;
(5) Whether to revise the existing definition for ``trade demand'';
(6) Whether to increase membership representation on the Board,
revise quorum requirements, allow voting by facsimile machines, only
require the participation of 10 members when voting by facsimile
machines, telegram or mail, increase the number of votes needed for
Board actions, and increase the number of affirmative votes needed to
make recommendations on reserve policies;
(7) Whether to change the date for submitting nominees for Board
membership to the Secretary;
(8) Whether to revise the terms of office and add tenure
requirements for members and alternates;
(9) Whether to require a written acceptance with the background
statement from nominees;
(10) Whether to expand activities for which handlers may receive
credit under the credit-back advertising and promotion provisions;
(11) Whether to revise the provisions regarding the determination
and redetermination of kernelweight for unshelled almonds and whether
to eliminate the shelling ratios for unshelled almonds;
(12) Whether to change the deadline date for disposition of reserve
almonds;
(13) Whether to delete the authority for the creditable advertising
provisions and to modify the generic advertising and promotion program;
(14) Whether to authorize the Board, with the approval of the
Secretary, to reapportion grower and/or handler member representation
on the Board based on the proportionate amounts of almonds handled by
different segments of the industry;
(15) Whether additional eligibility requirements should be added
for grower members on the Board;
(16) Whether to require handlers to maintain records in the State
of California;
(17) Whether to provide handlers advance notice before an audit or
inspection is performed;
(18) Whether to require handlers to submit to the Board a complete
list of growers who have delivered almonds to that handler during that
crop year;
(19) Whether to authorize the imposition of interest and/or late
payment charges for assessments that are paid late;
(20) Whether to authorize payment of interest in the event a suit
or administrative petition on payment of assessments is successful;
(21) Whether to amend the definition of almonds to exempt certified
organic almonds entirely from the marketing order;
(22) Whether to exempt certified organic almonds from advertising
and promotion assessments;
(23) Whether to require that a minimum of 25 percent of funds
collected for production research projects be spent on research and
development of production methods which reduce or eliminate the use of
synthetic chemicals in the production and handling of almonds;
(24) Whether to require that almonds grown and sold as ``certified
organic almonds'' be exempt from the reserve provisions;
(25) Whether to authorize the Board to enter into contracts for
periods up to five years for services, goods or other reasonable
expenses;
(26) Whether to require that continuance referenda be conducted on
a periodic basis;
(27) Whether to modify the reserve provisions of the order by
eliminating the authority requiring reserve almonds to be sold in
secondary or market development outlets and by authorizing handlers to
sell reserve almonds and the reserve obligation to other handlers;
(28) Whether to require that the first 250,000 pounds of almonds
handled by a handler be exempt from reserve provisions; and
(29) Whether to require incoming inspections be conducted no later
than the last day of February during the then current crop year.
Findings and Conclusions
The findings and conclusions on the material issues, all of which
are based on evidence presented at the hearing and the record thereof,
are:
Material Issue Number 1
The term ``cooperative handler'' should be amended by referencing
the California Food and Agricultural Code (California Code) in section
981.14 so that cooperative handler would be more clearly defined in the
marketing order.
Currently, section 981.14 defines cooperative handler as any
handler which is a cooperative marketing association of growers
regardless of where or under what laws it may be organized. This
definition is used for Board membership purposes only. Proponents
testified that this definition needs to be amended to eliminate any
misinterpretations or misunderstandings by the industry. Therefore, the
proponents stated that the definition should reference the California
Code which specifically defines a cooperative. Record evidence
supported that the term ``cooperative handler'' should be defined in
Sec. 981.14 to mean any handler as defined in section 981.13 (Handler),
and which qualifies for treatment as a non-profit cooperative
association as defined in section 54001, et seq. of the California
Code. Under this new definition, organizations would be unable to
identify themselves as cooperatives under the almond marketing order
unless they meet the specific criteria contained in the California
Code.
At the hearing, there was concern about future modifications to the
California Code which may be unacceptable to the almond industry.
Record testimony indicated that it was more important to develop a
concise definition that would help to alleviate current problems the
industry is experiencing with misunderstandings under the current
cooperative definition than to be concerned that the State may develop
an unsatisfactory definition of cooperative at some future date. If the
definition of cooperative was amended by the State and the amendment
rendered the definition unsatisfactory to the Board, it would become
necessary to [[Page 17469]] amend the marketing order definition again.
In the event the State definition changed but remained satisfactory for
marketing order purposes, a change in the State's legal citation would
still require a change in the order. Therefore, a provision is
recommended to be added to the amendatory language to allow the Board,
with the approval of the Secretary, to modify the definition through
informal rulemaking if the cooperative handler definition is changed by
California. This would allow the Board to change the definition without
going through the formal rulemaking process. This proposed amendment is
therefore recommended with the above modifications.
Material Issue Number 2
The term ``to handle'' in Sec. 981.16 should be amended to mean to
commercially use almonds of own production or to sell, consign,
transport or ship or in any other way to put almonds grown in the area
of production into any channel of trade for human consumption
worldwide.
Currently, Sec. 981.16 defines ``to handle'' to mean ``to use
almonds commercially of own production or to sell, consign, transport,
ship (except as a common carrier of almonds owned by another person) or
in any other way to put into channels of trade, either within the area
of production or from such area to points outside thereof, or to
receive as the first receiver thereof at any point of entry in the
United States and Puerto Rico, almonds which have been exported
therefrom and are submitted for reentry or are reentered free of duty *
* *''.
At the hearing, proponents testified that the current definition
should be amended to conform to the present state of the industry and
to ensure that some entities not normally considered handlers who may
sell almonds to channels of human consumption are subject to
regulation.
This proposed amendment intends to clarify the current definition
to insure that entities whose primary function is to remove hulls and
shells from almonds (hullers and shellers) who retain some of the
growers' almonds and sell them into human consumption channels are
subject to marketing order regulations for those almonds sold to human
consumption channels. These hullers and shellers are currently
performing a handling function by taking title to the almonds and are
covered under the current definition. However, the proponents believed
that further clarification to the definition is needed in order to
insure that hullers and shellers that perform handling functions are
regulated. Proponents testified that modifying the definition would
ensure that high quality almonds are shipped into human consumption
outlets. Proponents testified that because the new definition would be
clear, certain hullers and shellers would be aware that they are
subject to regulation under the marketing order. Because of this, the
number of almond handlers regulated under the marketing order may be
increased by this amendment, but the increase is not expected to be
significant. This proposal is not intended to bring all hullers-
shellers under the authority of the marketing order, but only those
that perform handling functions by placing almonds into human
consumption outlets.
The proponents also intended that growers not be considered
handlers unless they prepare the almonds into a form ready for human
consumption. In cases where growers deliver field run almonds to
another entity, the Board wants to clarify that the entities that
receive such almonds from growers and sell those almonds into human
consumption channels are considered handlers under the marketing order.
This proposed amendment is recommended.
Material Issue Number 3
The definition of the term ``settlement weight'' should be amended
in Sec. 981.18 to allow adjustments in settlement weight for inedible
kernels.
The current section defines settlement weight as the actual gross
weight of any lot of almonds received for the handler's own account,
less adjustments for weight of containers, for excess moisture, and for
trash or other foreign material of any kind. There is no adjustment
specified for inedible kernels.
Handlers report to the Board the almonds they receive from growers
in terms of settlement weight. If settlement is made on shelled
almonds, the settlement weight equals the kernelweight. If settlement
is made on unshelled almonds, the settlement weight is converted to a
kernelweight basis in accordance with Sec. 981.60 of the order. Volume
regulations and other order obligations are imposed on handlers on the
basis of kernelweight. Thus, the settlement weight of almonds received
impacts a handler's reserve obligations. Such obligations do not accrue
on those items deducted from the actual gross weight of the almonds
received (e.g., trash and other foreign material).
Evidence at the hearing indicated that almond production has
dramatically increased since the inception of the marketing order.
Therefore, the number of inedible kernels has also increased and the
disposition of inedible kernels has become a major issue for the
industry. Inedible kernel percentages are not currently deducted from
the gross weight in determining settlement weight. This amendment is
intended to allow handlers to deduct inedible kernels in settlement
weight calculations and thereby, more accurately reflect the marketable
quantity of almonds purchased by handlers.
This proposed amendment is recommended.
Material Issue Number 4
In Sec. 981.19, the term ``crop year'' should be amended from
``July 1 through June 30'' to ``August 1 through July 31'' in order to
more accurately reflect industry harvesting and marketing activities.
This change should also be made for handler recordkeeping purposes.
If this proposal becomes effective, the proponents suggest having
one 13-month fiscal year in the first year after implementation of the
amendment to provide for a smooth transition of the modification.
Almonds are normally harvested and received by handlers between August
and November. Record evidence indicated that there was concern that, in
the past, almonds were occasionally harvested as early as July. The
Board representatives were questioned as to what effects early crop
almonds would have on the change in fiscal year. For example, if a
reserve was anticipated for the following crop year, a handler may wish
to have July almonds apply to the previous crop year to avoid
subjecting those almonds to reserve requirements. The same situation
could apply if the assessment rate was raised. A handler could have
July almonds apply to the previous crop year to avoid paying a higher
assessment.
A statistical table submitted by the Department showed that for the
past 12 years, no almond receipts were listed in July, even in a year
where almonds were harvested in July. A Board representative stated
that, in those situations, the almonds were held in a handler's plant
and not inspected until August, so therefore they were not reported as
received until August. This representative stated that, in the rare
instance that almonds would be harvested in July, the almonds should be
considered new crop almonds and held until August. However, it also was
stated that under the proposed order amendment, July almonds would be
[[Page 17470]] considered as applying to the current crop year and
handlers could use that to their advantage by processing almonds in
July and not subjecting them to a reserve if a reserve was recommended
for the next crop year. It was stated that there was nothing in the
proposal to prevent that situation from occurring. One independent
handler's representative stated that his client would be the first to
report almonds in July if it meant being able to avoid a reserve.
Record evidence indicated that the amendatory language proposed by the
Board should be modified to correct the potential for problems relating
to this situation. Although the record indicated no almonds have been
reported in July for several years, the amendatory language has been
modified to correct this potential problem by adding a sentence to the
definition which states that any new crop year almonds harvested prior
to August 1 would be applied to the next crop year for purposes of
assessments, quality control provisions and volume regulations. This
proposed amendment is recommended.
Conforming changes are also necessary to the regulations to conform
with the change in crop year. There were three proposals relating to
conforming changes in reference to the crop year. One was withdrawn
(Proposal No. 22) because it proposed changing Sec. 981.441. Since the
publication of these proposals in the Federal Register, this section
has been completely modified and no longer references any dates
relating to the crop year. It was proposed to amend Sec. 981.467 by
making a date change to conform with the change in the crop year
(Proposal No. 23). It was proposed to amend Sec. 981.472 by modifying
the reporting periods for reports of almonds received to be consistent
with the new crop year calendar (Proposal No. 24). This proposal was
modified at the hearing to correct an error which appeared when
published. Specifically, at the hearing, the proposal was clarified to
amend paragraph (a) of Sec. 981.472 by removing the dates ``July 1 to
August 31'' and adding in their place ``August 1 to August 31'' and
removing the dates ``April 1 to June 30'' and adding in their place the
dates ``April 1 to July 31''.
A conforming change is also necessary to section 981.73 of the
marketing order regarding the filing of periodic reports. Testimony
confirmed the intent would be to change the July 15 reporting date to
August 15 and the June 30th reporting date to July 31. In addition,
Sec. 981.49(b) should be amended by changing the date through which
estimates of handler carryover and reserve inventory must be calculated
from July 1 to July 31. The above modifications have been made by the
Department.
Material Issue Number 5
The definition of ``trade demand'' should be amended in Sec. 981.21
to remove the option of not including exports as part of the trade
demand.
Currently, the term ``trade demand'' means the quantity of almonds
which commercial distributors and users such as the wholesale, chain
store, confectionery, bakery, ice cream, and nut salting trades will
acquire from all handlers during a crop year for distribution in the
United States, Puerto Rico, and the Canal Zone, provided that in
recommending the salable and reserve percentages for any crop year, the
Board may include, with the approval of the Secretary, export outlets
for almonds. Testimony indicated that, because of the growth of export
markets, they should be recognized as an integral part of the trade
demand for California almonds and that this proposal would more
accurately reflect the true worldwide nature of today's almond
industry. Statistics presented at the hearing confirmed the growth of
the export market. Record evidence also indicated that conforming
changes would be necessary to Secs. 981.47 and 981.66 to correspond
with this proposal by deleting phrases relating to trade demand
including either domestic or domestic plus export. Paragraph (f) of
Sec. 981.49 should be deleted as it relates to the percentage of
reserve almonds that may be exported. By making export almonds part of
trade demand, the Board's ability to establish an export percentage is
not necessary. This proposed amendment is recommended.
Material Issue Number 6
Sections 981.30 and 981.31 should be amended to increase Board
representation from 10 to 12 members to strengthen the influence of
growers on the Board. Section 981.30 establishes the number of
representatives on the Board and Sec. 981.31 sets forth the
representation of the members.
Current Board representation consists of two members representing
cooperative handlers, two members representing handlers other than
cooperative handlers (independent handlers), two members representing
growers who market their almonds through cooperative handlers, two
members representing growers who market their almonds through
independent handlers, one member representing handlers (cooperative or
independent handlers) who through March 31 of the then current crop
year handled more than 50 percent of the crop, and one member
representing growers whose almonds were handled through the handler
group that handled more than 50 percent of the crop.
Record evidence indicated that adding one additional grower
representing cooperative handlers and one additional grower
representing independent handlers would increase grower representation
on the Board. This would allow additional grower input in Board
decisions.
The date for computing the percentage of the crop handled by the
entities who handled more than 50 percent of the crop is also being
amended from March 31 to December 31 of the then current crop year to
allow more adequate time for the election process. The election process
for independent member and alternate member positions on the Board
requires that candidates submit their names for inclusion on a ballot
to be mailed prior to a specified date (currently April 20). Handlers
then vote for handler members and alternates. Each handler vote is
weighted by the quantity of almonds handled in a prior period. Growers
vote for grower members, with each vote equal in weight.
Record testimony and statistical evidence indicated that at least
95 percent of the crop is harvested by December 31 and modifying the
date in this section would have little or no impact on the percentages
computed in determining which group handled more than 50 percent of the
crop for that year.
Section 981.40 should be amended by revising paragraphs (b) and (c)
and amending paragraph (e) by removing the word ``seven'' and adding in
its place the word ``eight.'' This proposal would change the quorum
size and the number of votes required to recommend certain activities.
Specifically, the proposal intends that all Board decisions shall be as
follows: If eight or nine members are present, six affirmative votes
will be needed to pass an action; if 10 members are present, seven
affirmative votes will be needed to pass an action; if 11 or 12 members
are present, eight affirmative votes will be needed to pass an action.
Currently, Sec. 981.40 provides for a quorum size of six members
and a majority vote of the members present to pass Board
recommendations. In addition, Sec. 981.40(e) provides that seven
affirmative votes are required for Board recommendations with respect
to projects pursuant to Sec. 981.41 involving production research,
marketing research and development projects, and marketing promotion
including paid [[Page 17471]] advertising and crediting the pro rata
expense assessment obligation of handlers with such portion of their
direct expenditures for marketing promotion including paid advertising.
Witnesses testified at the hearing that the change in the quorum
size and number of votes needed to pass Board recommendations including
those under Sec. 981.41 would be needed if the Board is increased from
10 to 12 members. With the increase in membership from 10 to 12
members, the Board believes that more stringent quorum size
requirements would ensure that the almond industry is well represented
at Board meetings.
An opponent testified that the two-thirds majority component is
undemocratic because it allows the minority to effectively have veto
power over a majority of elected representatives. Another opponent
testified that because the cooperative segment will always have a
minimum of five votes, it has the ability to block Board actions. This
witness stated that although the independent segment has the same
ability, history has shown that it is rare for the independent segment
to vote in unison. This witness testified that since 1950, the
cooperative segment voted together on every occasion, except two.
The proponent testified that a two-thirds requirement would help
increase industry cohesion and harmony on important issues that come
before the Board. The proponent also believes that the almond industry
would become stronger as a result of this change as all industry
factions would work together to find common ground. Witnesses testified
that industry unity is a major factor when the Secretary reviews
recommendations submitted to the Department for action or approval.
Although the independent and cooperative segments have the ability
to block Board actions by voting in unison, neither could alone carry
enough votes to pass a recommended action under this proposal's voting
requirements. With the two-thirds majority, voting in unison by one
segment of the industry could keep an action from passing. However,
under a simple majority, one segment of the industry would be in a
position to actually pass a Board action with its seven votes. This
could allow Board actions and recommendations to be approved with only
the support of one industry segment.
Record evidence supports the quorum size being increased to a two-
thirds majority. Although there was testimony in opposition to
increasing the number of votes required to pass Board recommendations
from a simple majority to an approximate two-thirds majority, the
testimony in favor of this proposal by the Board, the Processors and
Hullers Association and the Almond Growers Council strongly supports
this proposal. As stated previously, this proposed amendment will allow
for more diverse support for Board activities and is, therefore,
recommended as proposed.
Record evidence indicated that the two-thirds voting requirement
has been used by the Board's public relations and advertising committee
and has been successful. The general belief of the committee members is
that the requirement has been very beneficial in helping them reach
consensus on major issues.
Section 981.49 should also be amended to increase the required
number of votes when recommending saleable and reserve percentages to
the Secretary.
Record evidence indicates that the number of affirmative votes
required to recommend saleable and reserve percentages should be
increased from six to eight. This change would require more stringent
voting requirements for reserve recommendations than those for other
Board actions in some cases. Such requirements would ensure that broad
industry support exists for such recommendations. This proposal was
unanimously supported by the Board and was supported by the Almond
Growers Council. No opposition testimony was presented at the hearing.
Additionally, this proposal addresses the issue of voting by
methods other than at assembled meetings. Currently, Sec. 981.40 states
that votes conducted by mail or telegram must be unanimous to pass an
action. Thus, even one negative vote would cause an action to fail. The
proposal would add facsimile machines as a method of voting, and would
require 10 affirmative votes out of a possible 12 votes on an issue
when voting by facsimile machine, telegram or mail for an issue to
pass. Record evidence indicated that, in the past, important Board
business was sometimes delayed by a member failing to respond by
telegram or mail for an issue to pass. The recommended change would
alleviate this problem and would increase the Board's options in voting
outside of assembled meetings.
These proposed amendments are recommended.
Material Issue Number 7
Section 981.32 should be amended to change the nomination deadline
for Board nominees from April 20 to January 20 and to change the
deadline for presenting the nominees for selection with the Secretary
from May 20 to February 20. Section 981.33 should also be amended to
change the beginning of the term of office from June 20 to March 1.
These proposals are intended to ensure that the new Board members and
alternates are seated prior to meetings where important decisions are
made for the following crop year. These issues could relate to setting
assessment rates, adopting budgets, approving production research or
advertising programs or setting a reserve. Testimony showed that this
proposal would allow new Board members and alternates to be seated by
March 1, which would help alleviate this problem as most of these
decisions are made after March 1 but before June 20.
The above proposed amendments are recommended.
Material Issue Number 8
Section 981.33 should be amended to change the Board members' terms
of office from one year to three year staggered terms to provide
continuity of operation. This section should also be amended to limit
these terms to six consecutive years. Currently, Board members serve
for a term of one year with no limitations on the number of terms
members can serve. The intent of one-year terms was to have a Board
that reflected the current interests and wishes of the almond industry.
Because of the many complex issues facing the almond industry
today, testimony indicated that more emphasis should be placed on long-
term strategic goals. Three year terms for some Board members would
allow the Board the opportunity to work together on industry issues and
develop long-term approaches. This would also provide continuity on the
Board from one year to the next year. The two new grower positions
proposed to be established under this formal rulemaking process under
Sec. 981.31(c) would remain at one-year terms. The record evidence
indicated that these two positions are swing positions, which means
that they would be subject to change each year depending on whether the
independent handlers or the cooperative handled the majority of the
tonnage.
With this proposal, it is intended that each year the terms of
office of three of the members would expire, except every third year
when the term of office for four of those members would expire. To
accomplish this, initially, three members would serve for a term of one
year, three members would serve for a term of two years and four
members would serve for a term of three years. At the time of
nomination the Board shall [[Page 17472]] make this designation by lot.
To the extent practicable, the designations should be equitable between
grower and handler positions and between cooperative and independent
positions. The two new grower positions would always be for a period of
one year. Nominees for each respective member and alternate position
would be chosen by ballot delivered to the Board.
The modification to section 981.32 also stated that ``each year the
terms of office of one third of the Board shall expire, except in 1994,
when all terms of office shall expire, except where otherwise
provided.'' Record testimony revealed that it was not mathematically
feasible for one-third of the Board terms to expire since 10 members
serve 3 year terms and 2 members serve 1 year terms. A brief filed by
Mr. Robert J. Crockett, Attorney for the Board, provided a modification
to the amendatory language correcting the mathematical error as stated
above as well as the reference to 1994.
Proponents also testified that section 981.33 should be amended to
require a term limitation of nine years for Board members. Record
evidence indicated that alternate members' terms of office would not be
subject to the nine year term limitation.
It is the Department's view that a limit on tenure for Board
members would improve representation on the Board by allowing for
different and more contemporary ideas, and that such a limit would be
beneficial to the Board's operations. The Department's policy is that a
Board member's consecutive service be limited to a total of six years.
At the hearing, proponents for the nine year tenure limitation
testified that nine years was the Board's proposal, however, the
testimony indicated that the proponents would not be opposed to a six
year tenure requirement. Further, proponents testified that the Board
would not be opposed to the Secretary extending the term of office
limitation for a member if another qualified candidate was unable to be
found willing to serve.
Thus, in conformance with the above policy, the Board's proposal
for a tenure limitation of nine years for Board members should be
modified to six years. Therefore, it is proposed that the order be
amended to limit the tenure of members to six years. Tenure would not
apply to alternates. The proposal intended that a person who has served
less than the term amount may not be nominated to a new term if the
total consecutive years on the Board at the end of that new term would
exceed the tenure. For example, a member could serve for a two-year
term and may then be elected to serve in a position that has a three-
year term. That member could not then be nominated to another three-
year term because the length of service (eight years) would exceed the
term limitation of six years.
Any member would become ineligible to serve on the Board after
having served six consecutive years. Such individuals could again
become eligible to serve on the Board by not serving on the Board for
one full year as a member. Since there is no term limitation on
alternate members, a member having served for six consecutive years
could serve as a alternate member for a year and be eligible to serve
again as a member. This limitation on tenure shall not include service
on the Board prior to implementation of this amendment.
These proposed amendments are recommended.
Material Issue Number 9
Section 981.34 should be amended to require those persons nominated
as Board members or alternate members to qualify prior to their
selection by the Secretary by stating that they agree to serve in the
capacity for which they were nominated.
Currently, any person selected to be a member or alternate member
on the Board is required to qualify by filing a written acceptance with
the Secretary after such selection is made.
At the hearing, proponents testified that the proposal is designed
to remove the possibility that a person who is unwilling to serve is
appointed by the Secretary to the Board. This would be accomplished
simply by requiring that the prospective candidate provide background
information and at the same time advise the Secretary that he or she
agrees to serve in the position for which nominated. All this
information would be provided to the Department prior to the selection
process. This proposal would allow candidates to be selected to the
Board in a more timely manner.
Section 981.34 should also be amended to clarify who is eligible to
serve in Board positions. Proponents testified that the eligibility
requirements for member and alternate members on the Board should be
clarified to more specifically state that grower members and alternates
must be growers or employees of growers and handler members and
alternates must be handlers or employees of handlers. Section 981.34
currently states only provisions relative to these persons ceasing to
be growers, handlers or employees of growers and handlers.
There was further discussion at the hearing that the intent of the
proposal would be to change the word ``may'' to ``shall''. This would
require that only such persons can serve in the grower and handler
positions. This change has been made to amendatory language.
These proposed amendments are recommended.
Material Issue Number 10
Section 981.41(c) should be amended by revising the last sentence
to allow the Board to expand the range of paid advertising activities
for which handlers may receive credit-back from their advertising
assessments. Section 981.41(c) should be amended by removing all text
following the words ``15 percent'' in the last sentence and removing
the colon after ``15 percent'' and adding in its place a period.
Currently, this provision lists activities that are not eligible
for credit against a handler's assessment obligation. These activities
include advertising production costs, preparation expenses, travel
allowances, other expenses not directly connected with paid space or
time, costs relating to pretesting of advertising, test marketing,
directory advertising, point of sales materials, premiums and trade
promotion allowances.
Hearing testimony indicated that by expanding the range of
activities for which handlers may receive credit back from their
assessments, the effectiveness of the industry's market development
efforts will be improved. The proposal complements actions taken by the
Board through informal rulemaking to replace a creditable advertising
program with an expanded credit-back program. The proposal is intended
to allow for a wider range of activities available for credit, thereby,
providing handlers, especially those with no brand name, with
additional opportunities.
Testimony against the proposal indicated that the new Credit-Back
program compels handlers to advertise their products and directs
handlers where and when to advertise almonds.
The marketing order does not compel handlers to advertise. The
Credit-Back program is a voluntary program that allows handlers to
receive credit-back from their advertising assessment if they engage in
certain types of promotional activities. The proposed amendment would
provide authority to expand upon an existing program by allowing the
Board additional flexibility in recommending modifications to the
regulations. Therefore, the proposed amendment is recommended.
Material Issue Number 11
Sections 981.60(b) and 981.61 should be amended and Sec. 981.62
removed to allow the settlement weight for [[Page 17473]] unshelled
almonds to be determined on the basis of representative samples of
unshelled almonds reduced to shelled weight.
Currently, Sec. 981.60(b) provides that unshelled almonds for which
settlement is made on the basis of shelled weight shall be included in
the total kernelweight for any handler at the settlement weight of such
unshelled almonds multiplied by the shelling ratios in Sec. 981.62.
Settlement weight is the weight of almonds that handlers pay growers
for upon delivery. Record evidence indicated that using a
representative sample for determining kernelweight is a common industry
practice. This practice would provide handlers with more accurate
kernelweight figures. Current procedure under this section requires
that shelling ratios be applied to the weight of unshelled almonds to
arrive at a kernelweight. Shelling ratios are established by variety.
Proponents testified that representative samples would be taken by
handlers on almonds received at the handler's premise under the
supervision of the Department's inspection service or by the inspectors
themselves. A sampling plan would be developed by the Board each year
and would prescribe the size of the sample to be taken dependent on the
actual weight of the load. For example, the plan would consist of
sampling procedures for each handler to use that would coincide with
the quality of the almond crop for that particular year. Evidence
supported an appeal process if any handler disagreed with the actual
representative sample taken. The appeal process would begin with the
complaint being brought before the quality control committee (a
subcommittee of the Board). If a handler did not receive satisfaction
through the quality control committee, the handler could then take the
complaint to the full Board.
Evidence also supported amending Sec. 981.61 of the marketing
order. Currently, Sec. 981.61 provides that, three times during the
crop year, the Board redetermine the kernelweight of almonds received
for the purposes of computing each handler's reserve obligation.
Section 981.61 further provides that the weights used in such
computations for redetermining the kernelweight for unshelled almonds
be computed by application of shelling ratios authorized pursuant to
Sec. 981.62.
Proponents testified that this is a companion proposal to the issue
of determining settlement weight for unshelled almonds. Therefore,
Sec. 981.61 should be amended to allow the Board to redetermine the
kernelweight of unshelled almonds by using a representative sample
reduced to shelled weight. Record evidence indicated that this
amendment would provide that the best and most common practices are
being used for redetermining kernelweight.
Finally, the record evidence supported removing Sec. 981.62 from
the marketing order. Currently, Sec. 981.62 contains a table of
shelling ratios for each variety of almonds. These varietal shelling
ratios are used for computing kernelweight for unshelled almonds.
Record evidence indicated that these shelling ratios are no longer
necessary to compute the kernelweight for unshelled almonds since the
proponents have recommended using representative samples to compute
such weight. Also, the shelling ratios are outdated because new
varieties of almonds have been developed since the marketing order's
promulgation.
Proponents testified that the amendments to Secs. 981.60, 981.61
and 981.62 are intended to reflect the industry's current practices and
provide a more accurate kernelweight figure.
These proposed amendments are recommended.
Material Issue Number 12
Sections 981.66(e) and 981.67 should be amended by changing the
disposition date for reserve almonds from September 1 to December 31.
Currently, these sections require reserve almonds to be disposed of by
handlers by September 1 of the following crop year. If any reserve is
remaining after that date, the Board is required to dispose of the
reserve through the most readily available reserve outlets. The order
also provides that the September 1 date may be extended by the Board to
a later date, if necessary.
Record evidence indicated that a December 31 date is a much more
practicable deadline date than the current date. When the order was
first promulgated, the almond industry was much smaller and the
majority of the crop was sold in the fall. At that time, there was
little need for storage and storage techniques did not allow the
product to be stored for a long period of time.
Proponents testified that the almond crop today is much larger and
storage capabilities allow handlers to store almonds for a year or
more. The last two times that an almond reserve was in effect, the
Board recommended that the September 1 disposition date be extended to
December 31. The record evidence showed that a December 31 disposition
date is a more realistic deadline for the industry based on current
industry practices. This proposal would also provide that the December
31 disposition date may be extended by the Board to a later date, if
necessary, with the Department's approval.
The proposed amendment is recommended.
Material Issue Number 13
Sections 981.40 and 981.41 should not be amended to delete the
authority for the Credit-Back advertising program under the almond
marketing order and to modify the generic program. In addition,
Sec. 981.81 should not be amended to conform with the proposal to amend
Secs. 981.40 and 981.41. A proponent of this proposed amendment
testified that the program is unconstitutional and a waste of the
growers' money. The program also requires several office hours and many
hours to complete forms to participate in the program. Further, the
proponent testified that by the time handlers get done wasting their
money on the current regulations, they have no funds left to advertise
almonds in the way they would prefer.
The proponent testified that other areas of the Credit-Back program
are burdensome and wasteful to the handlers. One area is that handlers
only receive credit-back for that portion of the product weight
represented by almonds or the handler's actual payment, whichever is
less. The proponent testified that this area of the Credit-Back program
is unfair because handlers should be paid back for all their
advertising since they moved a lot of almonds into the marketplace.
Further, the almond is used as an ingredient product and many handlers
sell almonds into that market. The proponent testified that the Board
should not care where the almonds are sold (e.g., cereals, candy, ice
cream, etc.). The Board should only be concerned about moving
California almonds into the marketplace.
Another area of concern expressed by the proponent was that the
government can dictate to handlers where to advertise and where not to
advertise, where they can get credit and where they cannot get credit.
The proponent testified that it is not opposed to the generic
advertising program. However, the witness proposed that the Board
should not be allowed to engage in promotion directed solely at snack
almonds nor should the primary purpose of any Board advertising or
promotion be directed for the consumption or sale of snack almonds. The
proponent testified that 95 to 98 percent of the entire almond
[[Page 17474]] production is for ingredient uses and not for snack
almonds. Therefore, the witness testified that Board funds for the
generic program should be spent on ingredient use.
Testimony from the opponents at the hearing indicated that actions
have been taken and additional recommendations are being made to
improve and expand the promotional activities for which handlers may
receive credit-back from their assessments. The Credit-Back program is
an example of an action which made the program more flexible. Another
example is the proposal in this proceeding to further expand the range
of activities for which handlers could get credit-back by amending
Section 981.41(c), thus increasing program flexibility for those
participating.
The opponents further testified that wide-spread industry support
exists for the creditable advertising provisions and the authority
should remain in the order. Opponents stated that this proposal
eliminates handler choice and severely handicaps the industry in
developing creative advertising and promotional activities. Regarding
the portion of the proposal to prohibit promotion of snack almonds,
opponents testified that problems would exist with attempting to define
a specific type of almond as ``snack.'' Opponents stated this part of
the proposal is arbitrary and capricious because the size of the
package, method of sale, product form or shape or other criteria do not
define almonds as snack. The witness testified that snacking is a form
of consumption rather than a form of product. Opponents believe that
all forms of almond sales can and do benefit the industry.
On August 17, 1993, the Department issued an interim final rule (58
FR 43500) which implemented a new Credit-Back advertising and promotion
program. The new Credit-Back program substantially revised the
creditable advertising program whereby handlers may receive credit
against their assessment obligation for their individual promotional
activities, in lieu of contributing entirely to a generic promotion
program administered by the Board.
Although the new Credit-Back program allows credit for the
percentage of almonds in other products, the program is designed to
promote the sale of almonds and almonds in products, not the products
that contain almonds. The Credit-Back program was recommended to the
Department by the Board which is comprised of independent and
cooperative members which represent the almond industry. The Credit-
Back program is a voluntary program that allows handlers to receive
credit-back from their advertising assessment if they engage in any of
a broad range of promotional activities.
Research studies show that promotional programs conducted under the
almond marketing order have been effective and are a good investment of
industry funds. The Credit-Back program combined with the Board's
generic program is a proven method of promoting almonds. The combined
generic and Credit-Back program administered by the Board recognizes
the positive aspects of both forms of promotion and has been proven to
be successful and responsive to changing needs and desires of the
industry over time.
We agree with the view that the marketing order promotion and
advertising provisions should remain as flexible as possible and
provide choices for the Board in determining how best to promote
almonds. Removing authority for a Credit-Back program would reduce the
options available to the industry for promoting its product.
Maintaining that authority does not mandate use of such a program, it
merely preserves an available tool.
It is determined that this variety of options can only benefit the
industry. It is also determined that restricting the generic program by
not allowing promotions for snack almonds also would unnecessarily
limit choices for the Board and would not serve any useful purpose.
Accordingly, the record evidence does not support the amendment to
eliminate the creditable advertising provisions or to modify the
provisions as recommended in this proposal. Therefore, this proposed
amendment is not recommended.
Material Issue Number 14
Section 981.32 should be amended to authorize the Board, with the
approval of the Secretary, to reapportion grower and/or handler member
representation on the Board based on the proportionate amounts of
almonds handled by different segments of the industry.
A proposal was submitted and testimony received at the hearing
which would require that cooperative representation on the Board not
exceed the percentage of the industry tonnage handled by the
cooperative in the immediately preceding crop year. However, no
specific amendatory language was provided by the proponent.
At the hearing, the proponent testified that the industry's major
cooperative marketing association, Blue Diamond Growers, Inc. (Blue
Diamond), should not be guaranteed five of the 12 seats on the Board.
The proponent testified that it is no longer democratic to provide Blue
Diamond with five seats on the Board since the industry percentage of
almonds handled by Blue Diamond has decreased. The proponent provided
the following example of how the proposal would work: If Blue Diamond
handled from 45 to 55 percent of the industry tonnage, Blue Diamond
would have five seats; 35 to 44.9 percent, Blue Diamond would have four
seats; 25 to 34.9 percent, Blue Diamond would have two to three seats.
The proponent stated that this would prevent a single entity, such as
Blue Diamond, from bloc voting on Board proposals. The proponent
further stated that, currently, Blue Diamond has an unfair advantage by
being allowed to always have five seats on the Board.
Opponents to this proposal testified that the Board's proposal to
increase the number of members from 10 to 12 would provide additional
grower representation on the Board. The proposal to increase the number
of Board members represents the overwhelming sentiment of the industry.
Opponents also testified that, in the past, the cooperative was able to
have a majority of the Board's membership because of the amount of
tonnage it handled. However, that is not the situation that exists
today, as independent growers and handlers currently hold a majority of
the Board's member positions.
Another opponent testified that, even with the decline in the
percent of total crop handled by Blue Diamond, their membership exceeds
50 percent of the total number of California almond growers. Further,
other opponents testified that the proposal is directed at only one
organization, and fails to take into account that, even at 30 percent
of the crop handled, the cooperative would still represent over 50
percent of the total number of almond growers in the State of
California.
The proponent testified that, without obtaining a list of the
cooperative's growers, it is not possible to determine if, in fact, the
cooperative does represent over 50 percent of the total number of
growers in the State of California. The proponent further testified
that Board representation should be based on tonnage in all
circumstances.
An opponent testified that if, in ten years, the cooperative
represented ten percent of the industry, the cooperative should not
have five seats on the Board. Another opponent testified that he would
prefer the whole industry to operate on a tonnage basis.
Record evidence indicates that currently, there is strong industry
[[Page 17475]] support to maintain Board membership representation with
the cooperative and independent segments being authorized to hold the
specified numbers of seats proposed in Material Issue Number 6.
However, in the event the industry structure changes in future years,
there may be a need to further modify the structure of member
representation.
Record evidence does not support amending the marketing order as
the proponent recommended. The evidence does support, however,
authorizing the Board, with the approval of the Secretary, to modify
the membership representation requirements in the future if the
industry structure changes.
This would allow the Board, with the approval of the Secretary, to
recommend modifications to the representation requirements, if
necessary, through informal rulemaking procedures. This would provide
additional flexibility in the program by providing and ensuring that
the Board continues to fairly represent all segments of the industry.
Therefore, this proposal is recommended, in part, by authorizing
the Board, subject to the approval of the Secretary, to reapportion the
grower and/or handler member representation among the 12 member
positions, of any group listed in the proposed Sec. 981.31 (a) through
(c) to be nominated as a Board representative. This proposal does not
intend that the Board may increase or decrease the number of members on
the Board. The Board may reapportion the positions within the 12 member
Board. A new paragraph (d) has been added to Sec. 981.31 to set forth
this recommendation.
Material Issue Number 15
The proposed amendment to section 981.12 would have revised the
definition of grower. At the hearing, the proponents for this amendment
revised the amendatory language that was published in the Notice of
Hearing as follows: For the purpose of holding a grower seat on the
Board, a grower would be required to have over 50 percent of his or her
involvement and income in the almond industry derived from growing
almonds. A grower wishing to run for a seat would certify to this
criterion on the nominating petition.
Proponents testified that, in the past, some grower seats have been
occupied by persons who were basically handlers. It was perceived by
growers that they consistently represented a handler point of view at
the expense of the grower. The proposal is intended to ensure that the
grower seats on the Board are represented by growers and the growers'
interests are reflected and represented. The proposal would only apply
to independent growers who are nominated to become members or alternate
members on the Board because its purpose relates to nominations for
Board positions.
At the hearing, proponents testified that the grower would sign a
certification that over 50 percent of his or her involvement and income
in the almond industry was derived from growing almonds and would make
that known to all growers when running for a Board position. If an
opponent had signed the certification and it was well known that the
opponent was basically a handler, the grower could raise that issue
during the campaign. Proponents also testified that the grower would be
making the determination as to the 50 percent involvement and income,
and there would be no penalty for falsifying the certification. In
addition, if a grower refused to sign the certification, the grower
would be ineligible to serve on the Board.
Record evidence indicated that although certifications by growers
could be signed during the nomination process, there is no procedure to
verify such certifications, nor is there a penalty for a false
certification. Therefore, the intent of this proposal would not be
served.
The proposal has been modified by revising Sec. 981.32, rather than
Sec. 981.12 as proposed by the proponents. Record evidence supported
that the intent of the proposal is to only modify the definition of
grower with respect to nominations of growers to the Board. It would
not be appropriate to modify the grower definition under Sec. 981.12
since this definition applies to the use of grower throughout the
marketing order.
It is therefore proposed that a new paragraph be added under
Sec. 981.34 to further define grower for nomination purposes. The
record evidence supports a grower definition that would allow growers
to be nominated to the Board that would truly represent grower
interests. However, the proponent's amendment would not be enforceable
as proposed and would not accomplish the intent of the amendment.
Therefore, the Department proposes that the Board be provided the
authority, with the approval of the Secretary, to make recommendations
to establish additional eligibility requirements for growers, for
nomination purposes, through informal rulemaking. This would allow the
Board to further explore avenues to accomplish the intent of the
proposed amendment. The amendatory language therefore has been modified
to add such authority.
Material Issue Number 16
Section 981.70 should be amended to require handlers to maintain
records in California to provide Board auditors with reasonable access
and improve program management. Currently, Sec. 981.70 only requires
that the handler's premises be accessible to Board auditors for records
to be examined and audited.
At the hearing, proponents testified that Board auditors should not
have to travel out of state to examine handler records. It is an
economic burden on the Board, and therefore the almond industry, to pay
travel expenses for Board auditors to travel out of state. In addition,
it is necessary to have immediate access to handlers' records if
compliance issues arise.
An opponent testified that handlers could be burdened by being
required to maintain all records in California. He stated that some
needed records could be the buyers' or the shipping company records. In
addition, the witness testified that the terms ``as well as other
pertinent information regarding his or her operations'' could lead to
abuse if the person determining what is ``pertinent'' selects some
unreasonable records such as tax returns to be maintained in
California.
The purpose of this proposal is to keep handlers from maintaining
all their records in a different state making it difficult for the
Board to effectively audit handler's records. It is not intended that
handlers maintain records in the state that would not normally be
maintained, such as buyers' or shipping company records. This proposal
does not intend to add any undue hardship on handlers and the proposal,
as written, does not make unnecessary or unreasonable requirements on
handlers. The language which would require different types of records
than those specified, if necessary (``other pertinent information''),
is necessary to account for the many different recordkeeping systems
maintained by handlers.
Maintenance of records within the State of California would assure
that the benefits from marketing order compliance activities exceed
related costs. It is not expected that any additional costs would be
incurred by handlers to comply with this amendment. Therefore, this
amendment is recommended as proposed.
Material Issue Number 17
The proposed amendment to section 981.70 would have required that
the Board provide handlers with 24 hours advance notice before they
conduct audits of records and inspections of reserve almonds. In
addition, handlers [[Page 17476]] would not have been required to
provide any labor or equipment to the Board to facilitate inspections.
Currently, Sec. 981.70 provides that each handler's premises shall
be accessible to authorized representatives of the Board and the
Secretary for examination and audit of handler records and for
inspection and observation of reserve almonds. The Board shall make
such checks of almonds or audits of each handler's records as it deems
appropriate or as requested by the Secretary to insure that accurate
information as required in this part is being furnished by the
handlers.
A proponent testified that handlers may be busy with almond buyers
and may not have time to show all the records that Board auditors need
to examine during an audit visit. The proponent testified that handlers
should be made aware of the audit visit in order to make preparations
to have the records made available for the audit. Further, the
proponent stated that handlers should be treated like businesses and
not as if they are under constant suspicion of violating the marketing
order. In addition, the proponent testified that if a handler does not
desire to assist and aid the Board in conducting the audit, the handler
should not be required to furnish labor and equipment to do it. The
handler should not be required to bear the expense or the liability of
conducting handler audits.
The record evidence indicated that the almond industry is subject
to Federal regulations under a marketing order. Regulated industries
that choose to participate in a Federal program are subject to
inspection of records. The marketing order currently contains authority
to allow the Board to conduct checks of almonds or audits of each
handler's records. Testimony indicated that the Board has the authority
to make these visits without prior notice. The record evidence supports
this provision remaining in order to properly carry out the regulatory
aspects of the order.
At the hearing, additional testimony in opposition to the proposal
indicated that Board staff usually schedules appointments with handlers
ahead of time to maintain a positive and courteous relationship between
the Board and the handlers. However, the reality remains that all
handlers do not comply with the provisions of the marketing order.
Opponents testified that removal of the authority to make unannounced
visits to audit handlers would remove an important compliance tool from
the Board and the Secretary. A handler with something to hide would
have plenty of time to conceal vital documents from scrutiny by
authorized Board personnel.
Opponents further testified that most handlers prefer to conduct
any movement of product by using their own personnel and equipment at
their premises. Handler personnel would also be familiar with the
location of reserve almonds that would need to be examined.
Accordingly, the record evidence does not support the amendment to
require the Board to provide handlers with 24 hours advance notice
before it conducts audits and inspections or for handlers to not be
required to furnish any labor or equipment to the Board to facilitate
inspections. Therefore, this proposed amendment is not recommended.
Material Issue Number 18
The proposed amendments regarding Secs. 981.76 and 981.90 would
each require handlers to submit to the Board a list of growers who have
delivered almonds to such handler during the crop year. Because these
proposals would provide for essentially the same recommendation, they
will be discussed as one material issue.
The proposed Sec. 981.76 would require each handler to submit to
the Board, no later than December 31 of each year, a complete list of
growers who have delivered almonds to such handler during the crop
year. The proposed amendment to Sec. 981.90 would require each handler
to submit to the Board, no later than January 31 of each year, a list
of names and addresses of all growers from whom such handler received
almond production for the then current crop year.
Currently, the marketing order does not require such information to
be submitted to the Board under any section. Such information is
submitted to the Board by most handlers on a voluntary basis for
nomination purposes.
Proponents testified that the proposals are intended to help the
Board be more efficient in conducting elections for Board members and
alternate members. Since the list is currently submitted to the Board
on a voluntary basis, the Board is not assured that it has a complete
and accurate list of growers to use in conducting the election of Board
members. In order for the Board to operate efficiently, it is necessary
for the Board to reach as many growers as possible. Mandatory
submission of grower lists would help accomplish this goal. The
proponents testified that the amendment would help provide the widest
possible participation by growers in the election process.
The proponents stated that this requirement would respect the
private business relationship between a grower and handler. The
proprietary nature of the relationship would be respected by the Board
and that information would not be divulged by the Board.
A proponent testified that the list would be used for annual
elections of Board members and for periodic continuance referenda. The
list would not reveal a grower's handler affiliation. This proposal
would further provide that the Board could charge handlers and growers
who request the list for photocopying and mailing.
A witness testified that the cooperative grower list is needed when
periodic continuance referenda are conducted because other interested
parties to a referendum have a right to know who those growers are so
they are in a position to provide them information which may influence
their vote. This witness further testified that the Board should know
who these 4,000 growers are so they are aware if any of these growers
become handlers.
The opponents to the amendment testified that it is a well-
established fact that lists of members of agricultural cooperatives are
considered proprietary information. The witness testified that there
are no other programs in which cooperatives are required to release
such a list and the Department has long recognized that cooperatives
are not required to reveal the names of their members. Many farmers who
belong to agricultural cooperatives do not want their names and
addresses used for purposes other than those needed by the cooperative
to properly perform its business functions. The opponents further
testified that the only reason for a requirement for handlers to submit
grower lists is for the use in the election of Board members
representing those marketing through independent handlers.
Opponents testified that Board elections have been conducted with
wide publicity and all growers have an opportunity to participate. The
cooperative informs all its members when elections do take place even
though Board members are nominated by the cooperative's board of
directors.
An opponent testified that the release of such information would be
controlled directly by the Department, which in turn is controlled by
the Administrative Procedure Act, the Freedom of Information Act, and
the Privacy Act, as well as court interpretations. By including the
proposed language in the marketing order, the Board could face a
situation in which the marketing order mandates release of information
while [[Page 17477]] the Department and the courts or both may require
that the information not be released. Therefore, the question of
release of information should be left to the Department.
A brief filed by Mr. Steven W. Easter of Blue Diamond Growers
stated that the two similar proposals discussed at the hearing were
worded slightly differently but they essentially provide for the same
thing. Both proposals are directed at requiring Blue Diamond Growers to
turn over its cooperative membership list to the Board. Both proposals
represent an effort by independent handlers and growers to obtain the
membership list of their principal competitor, Blue Diamond Growers.
Mr. Easter stated that there is no other proposed amendment nor any
current provision that requires a cooperative, including Blue Diamond,
to furnish its membership list to the Board. It is well established
that growers may contact the Board directly to be placed on the Board's
mailing list. Mr. Easter also stated that Blue Diamond provides notice
of all elections to its members directly. This satisfies Blue Diamond's
contractual obligations with its members and the Board's desire to have
all members of the industry notified of elections. The witness stated
that this system has worked for 43 years.
Mr. Easter further provided in his brief that Blue Diamond's
membership list contains the names and addresses of all of its grower/
supplier members and is, in that sense, its customer list. Under
California law, customer lists have been protected as trade secrets
under the Trade Secrets Act so long as they meet the definition set out
in California Corporations Code. In conclusion, Mr. Easter stated that
elections to the Board and referenda on proposed amendments and
continuation have taken place since 1950 successfully. The guidance
provided by the Board has enabled the industry to move forward in a
beneficial manner. Mr. Easter requested that the proposal be rejected.
The record evidence indicates that it would benefit the Board to
have a list of independent growers' names and addresses. Board
elections would be conducted in a more efficient manner and there would
be greater assurance that all growers are informed regarding activities
centered on Board elections. The record evidence supported that it is
not necessary for the Board to obtain the names and addresses of
cooperative growers for nomination purposes since those Board members
are selected by the cooperative's board of directors. Although grower
lists not revealing handler affiliation can be obtained by requesting
the list from the Department under the Freedom of Information Act, the
Board is responsible for confidentiality of handler information and
does not release a complete growers' list.
When continuance referenda are conducted, a method to ensure that
ballots are provided to all cooperative growers would have to be
derived. For example, one method would be for the Department to provide
the ballots to the cooperative and obtain a sworn statement from a
representative of the cooperative attesting that all growers were sent
ballots. It would be in the best interest of the cooperative to ensure
that all of its growers vote in referenda and USDA will ensure that a
satisfactory method has been established when continuance referenda are
conducted.
In the event a cooperative chooses to bloc vote for all its members
in a referendum, the Department would require the cooperative to submit
a grower list to verify that none of those members also voted
individually. However, this is not sufficient reason to require the
cooperative to submit a grower list to the Board on an annual basis
since the Board does not need that list to conduct its operations.
Regarding the testimony that the Board needs to know the
cooperative growers in case any of them become handlers, this does not
appear to be sufficient reason to require this list from the
cooperative. The Board has an established compliance program to address
compliance issues and needs. Also, if a grower list is desired, such a
list can be obtained from other sources. Testimony indicated there are
alternative sources for that information.
For the above stated reasons, the proposed amendment is modified to
allow the Board to request from independent handlers their growers'
names and addresses for purposes of elections. The lists would be
submitted no later than December 31 of each year to facilitate Board
administration. The proposed amendment, as modified, is therefore
recommended.
Material Issue Number 19
Section 981.81 should be amended to add authority to require
handlers to pay interest and/or late payment charges in order to
discourage late payment of assessments.
Currently, Sec. 981.81 requires handlers to pay to the Board on
demand assessments on almonds received by the handler for the handler's
own account. There is no provision for a late payment or interest
charge.
The proponents testified at the hearing that the Board's
experiences with collection of assessments for administration, research
and generic promotion have been frustrating. At the present time, about
90 percent or more of the handlers promptly pay the assessments when
due, others are at times slow to pay. As of June 30, 1993, the Board
was owed past due assessments totaling several million dollars. If
these amounts had been paid promptly, the funds received could have
been utilized for Board programs. The proponents do not believe that it
is equitable for late paying handlers to benefit from the wide variety
of Board programs financed by handlers who pay on time. Significant
industry support is necessary in order for the marketing order to be
successful.
An opponent to the proposal testified that handlers who challenge
the assessment rate would be penalized if they pay the assessment in
order to avoid the late charges because they would not recoup the
assessments paid if they prevail in their challenge. This position is
discussed in detail in Material Issue Number 20 which deals with
another proposal to authorize payment of interest in the event a suit
or administrative petition regarding payment of assessments is
successful.
This witness further testified that if this proposal is authorized
and regulations are implemented, it would be better to require that the
payment be postmarked within 30 days from the invoice date rather than
received in the Board office within 30 days.
The proponents testified that the Board envisioned implementing the
specifics of the late payment and/or interest charges through informal
rulemaking with the Secretary's approval. This would allow the Board to
remain flexible with the establishment of the interest and/or late
payment charge. The Board proposed language for the regulations in this
proceeding. However, USDA has determined that this would be better
accomplished by the Board recommending to the Secretary an informal
rulemaking action at a later date if this provision is implemented.
The suggestion that payments be postmarked within 30 days of
invoice to be considered timely does have merit. When assessing
interest charges for late payment, it would appear reasonable that
handlers be allowed 30 days from invoice to mail these charges to the
Board. The Board should consider this suggestion when making a
recommendation to the Secretary to implement the regulations regarding
late payment and/or interest charges.
The record evidence supports this proposed amendment and therefore,
it is recommended. [[Page 17478]]
Material Issue Number 20
This proposed amendment to the order would have required refunds
plus payment of interest to a handler in the event a suit or
administrative petition filed by such handler challenging the payment
of assessments is successful. No specific amendatory language was
provided.
The proponent testified that there have been several challenges to
the almond, orange and tree fruit marketing orders. In these cases, the
proponent stated that the Judicial Officer of USDA did not authorize
the prevailing handler to recoup the assessments paid. The proponent
also testified that the Agricultural Marketing Agreement Act permits
handlers to challenge provisions of federal marketing orders, including
the establishment of assessment rates. The Board's proposal to add an
interest and/or late payment charge would penalize handlers that
challenge the assessment rate since they would have to pay the
assessment to avoid the late charges but would not receive the
assessment back if they prevail. In addition, the Department argued in
court that the Board would have to vote for a prevailing handler to
have assessments returned and the funds would have to be approved in
the Board's budget.
The proponent further testified that it is better to address the
issue at this time by putting the provision in the marketing order than
to wait for the Department to tell the Board they have to pay the
handler back their assessments plus interest. It was discussed at the
hearing where the money should come from to pay back the handler, and
the proponent testified that such money should come from the
Department. If not from the Department, the money should come from the
industry. The witness testified that the Department continues to
approve every proposed rule for assessments over the proponent's
objections, therefore, they should pay the money back to the prevailing
handler.
Opponents to the proposal testified that they are opposed for three
reasons. First, there was no language specified to analyze the
proposal, therefore, their understanding of the subject was vague and
undefined. Second, the proposal refers to the legal rate of interest
which is not compatible with the Board's proposal. Third, the term
``successful'' is not defined to differentiate between an
administrative ruling before a law judge or the final review by the
Judicial Officer. The opponents further testified that such rulings may
be reviewed by the District Court, therefore, this proposal must be
opposed because it does not clearly state at what point a handler could
claim a refund of assessment and the accompanying interest. Also,
depending on the timing of such refund, the Board may not have funds
available to make the refund.
The proponent responded to the opposition by stating that he has no
qualms with stating that the interest rate be the same as what the
Board established. Also, that within 30 days of a final non-appealable
decision being made, the Board should make the refund. Finally, if the
Board does not pay back the prevailing handler in 30 days, the Board
would be required to pay a five percent penalty.
The record evidence does not support this proposed amendment.
Section 610b(2)(ii) of the Act provides that handlers regulated by
marketing orders pay their pro rata share of such expenses as the
Secretary may find are reasonable and likely to be incurred during a
specified period for the maintenance and functioning of the marketing
order. Section 608c(15)(A) of the Act provides a method for challenging
marketing order provisions, including the requirement to pay
assessments, through administrative petitions. In addition, several of
the issues which this proposal raises are currently being appealed to
the Ninth Circuit.
Therefore, this proposed amendment is not recommended.
Material Issue Number 21
The proposed amendment to section 981.4 would have amended the
definition of ``almonds'' to exempt certified organic almonds from the
entire marketing order.
Currently, the marketing order does not differentiate between
almonds that are organically grown and those that are not.
The proponents for this amendment testified that the markets for
organic almonds are totally separate from those for conventionally
grown almonds. The organic tonnage of almonds in the industry is very
small. The proponent testified that he empathizes with the organic
growers since they do not want their money spent on Board programs that
do not benefit organic almond growers and handlers. The proponent
stated that the California Department of Food and Agriculture has
strict requirements for certified organic commodities and penalties if
growers violate them.
Opponents testified that it would be difficult to determine if an
almond has truly been organically grown. While it is true there are
voluminous regulations on organic products, once the almonds reach the
market place, it is impossible to discern organically-grown almonds
from those that are not organically grown. In addition, the opponent
testified that organic growers currently benefit from the various
programs conducted by the Board. The Board is pursuing a very active
program of promoting almonds. Organic growers benefit from the
perceived value of almonds that result from such aggressive promotion
programs. There are also many production research programs sponsored by
the Board that benefit organic growers as well as other almond growers.
They include crop irrigation management, bud failure, nematode
infestation, integrated pest management and problems from Africanized
honey bees. The opponent further testified that all segments of the
industry are interested in finding the most cost-effective, reliable
method of increasing production and delivering a high-value, safe
product to the consumer. In addition, the opponent stated that the
Board is committed to working with organic growers to ensure that their
interests are considered in making Board recommendations.
Several organic growers and handlers submitted proposals for
differential treatment under the almond marketing order, but did not
propose the organic community be entirely exempt.
Accordingly, the record evidence does not support the amendment to
exempt organic almonds entirely from the marketing order. Record
evidence shows that organic growers do reap some benefits from the
order and its programs, which include certain research activities and
the new Credit-Back advertising program. Therefore, this proposed
amendment is not recommended.
Material Issue Number 22
The proposed amendment to Sec. 981.41 would require that handlers
not be assessed for marketing promotion, including advertising for the
number of pounds of certified organic almonds handled. Currently, there
is no provision in the marketing order to exclude organic almonds from
the marketing promotion program.
The proponents for this amendment testified that the proposal is
intended to provide an exemption for certified organic almonds from the
advertising assessments since advertising for conventional almonds is
not relevant to the market for certified organic almonds. The market
for organic almonds is not yet well developed and does not benefit from
generic advertising of almonds. The market is a [[Page 17479]] niche
market, made up of consumers who are seeking a guaranteed organic
product. Any effective advertising must be geared to that market. The
proponents testified that there are strict penalties for violating the
certified organic regulations. Under Federal law, it is a violation to
sell anything as organic that is not certified organic, and there is a
fine of up to $10,000. In addition, any person found to have violated
the law can be prohibited from organic certification for five years.
The proponents stated that buyers of certified organic almonds
include natural food stores, consumers through mail order, roadside
stands, certified farmers markets and specialty health food
distributors. The end user is a consumer looking for an organic product
first. If the consumer cannot find organic almonds, the consumer is
more likely to substitute a different organic product rather than
conventional almonds. Under the current assessment program, even if the
certified organic handlers fully participate in the credit-back
program, 50 percent of their assessment would still support generic
advertising which is not relevant to their market. This proposal would
have a positive benefit on growers and handlers of certified organic
almonds, most of whom are small businesses.
Another proponent testified that certified organic almond handlers
need relief from the burdens and restrictions imposed by the Board.
Certified organic almonds have very little in common with commercial
almonds. Promotion and advertising requires a different direction and a
totally different target market which is not acknowledged by the Board.
Testimony in opposition to the amendment indicated that organic
almonds should continue to fall under the marketing order and be
assessed for marketing promotion. The opponent testified that all
almonds benefit from generic advertising and promotion campaigns
conducted by the Board. This includes growers that grow the Mission
variety of almonds that appeals to the candy manufacturers. However,
the opponent testified that Mission variety growers are not asking to
be exempt from the order. The witness further stated that pooling
industry resources can stimulate industry growth for the benefit of
everyone. The opponent stated that the Board has made an effort to
reach out to the organic growers and establish dialogue on key issues.
The witness testified that there is a lot of common ground and that the
industry can continue to build on that common purpose and interest by
working together rather than working apart.
The record evidence supports that the organic market is a separate
and distinct market. Although testimony indicated that generic
advertising for conventional almonds could have a limited effect on
organic consumers, the organic industry may not benefit directly from
the Board's generic advertising program. However, the evidence did show
that organic handlers could derive some benefit from the Board's new
Credit-Back advertising program. The Board has stated that it wants to
work with the organic segment of the industry and recognize them as an
important part of the industry. Therefore, the Department is modifying
the amendment to provide that the Board may, with approval of the
Secretary, exempt certified organic almond handlers from the
advertising assessment through further informal rulemaking. This would
provide the Board and the organic segment of the industry with the
flexibility of exempting handlers of certified organic almonds from the
advertising assessment. It would also provide for development of a
framework to implement and verify compliance with such an exemption.
Therefore, the proposed amendment is recommended as modified.
Material Issue Number 23
The proposed amendment to Sec. 981.41 would require that a minimum
of 25 percent of funds collected for projects involving production
research shall be spent on research and development of production
methods which reduce or eliminate the use of synthetic chemicals in the
production and handling of almonds. Under the current marketing order,
there is no requirement that a minimum amount be spent in any certain
area.
The proponents testified that this amendment is intended to benefit
all almond growers by finding ways to reduce and eliminate the use of
synthetic chemicals. This effort is especially important in light of
the restrictions on continuing availability and use of certain
agricultural chemicals. Record evidence indicated that this research
activity would be coordinated by the production research committee of
the Board. The proponent recommended the appointment of one or more
growers of certified organic almonds to the production research
committee. The committee would issue a request for proposals that
contribute to finding new production techniques which reduce or
eliminate the use of synthetic chemicals. The committee would then
allocate a minimum of 25 percent of funds, earmarked for research, for
such proposals.
The proponents further testified that the amendment would require a
positive effort to seek out and fund proposals that investigate ways to
reduce chemical use. Such a pro-active policy by the Board would send a
signal to the research community to generate these proposals. It would
also send a message to the public that the Board is taking steps to
improve the environment through reducing the use of synthetic
chemicals. This effort is important to the future of the industry for
two reasons: (1) Various agricultural chemicals commonly used by almond
growers are being phased out and will be taken off the market by
government regulations; (2) very little research is currently being
conducted on non-synthetic alternatives for almond growers and
handlers. The proponent testified that she is aware of only one Board
research project in this area.
The proponent testified that this proposal would help all almond
growers and handlers face the challenges of decreasing availability of
agricultural chemicals and increasing pressure from environmental
groups. Developing such alternatives would protect growers and handlers
from potential large crop losses and would satisfy consumer demand for
reduced chemical usage. The proposal would also have a positive effect
on small businesses since most growers and handlers of organic almonds
are small businesses.
At the hearing, opponents did not believe that one tenth of one
percent of the industry should be in a position to dictate to the other
99.9 percent of the industry how to spend its funds, especially
considering that this small segment is attempting to be exempt from
certain major areas of the order. The proponent testified that the
organic community believes that this proposal would be beneficial to
the whole almond industry. Every grower is under pressure to reduce
chemical use. The proposal would give the industry the tools to meet
production needs and to reduce pest and diseases without using
chemicals. It was further discussed that organic almond growers have
not brought forth any research projects to the production research
committee. Also, the proponent was not aware of any such research
projects being turned down by that committee.
It was also discussed that the marketing order currently contains
authority to accomplish the proponents' goal. If the proponents
attended the production research meetings and provided information on
the needed [[Page 17480]] research in those areas, they could possibly
convince the Board to fund projects in the proposed area. In addition,
testimony was offered that the Board may not be able to find within the
research community projects to reach the 25 percent minimum that is
proposed. The proponents testified that if a bona fide effort was made
by the Board to obtain such projects, funding a lesser percentage would
not be a problem. A bona fide effort by the Board would include: (1)
Prepare a request for proposals that specified the type of research
that is desired by the Board; (2) clarify the amount of money that is
being set aside for that type of proposal; and (3) distribute widely to
the universities, the extension service and to other known researchers,
notice of the opportunities to conduct this type of research.
Another proponent of the amendment testified that some of the areas
that need immediate attention are the study of soil biology, fungus
control, climatic and economic thresholds, understanding the value of
beneficial organisms, developing environmentally sound methods of
production, wildlife habitat enhancement, etc. The proponent further
testified that if the Board is spending its money, it should be on
projects that directly benefit the organic farmer as well as the
community at large.
The opponents testified that the Board has a very strong commitment
to production research. Currently, the Board has budgeted $500,000 for
various research projects. The benefits of these studies are shared
throughout the industry. The Board invites members of the organic
almond community to participate at the production research committee
meetings and take part in the process which determines which studies
will be funded. The witness testified that the process of open
committee meetings in which there can be active dialogue best lends
itself to achieve the goal of this proposal. The witness testified that
a bad precedent would be established by having a marketing order
amendment to guarantee funding for one particular research project, no
matter how well intentioned. Such action would leave the door wide open
for a long line of groups demanding the order be amended to accommodate
their needs. The witness testified that the framework exists which can
be used by the organic community to make its case for funding projects
as proposed.
The opponent also testified at the hearing that the Board is
currently funding such type of projects. For example, one project is to
find ways to reduce the use of chemicals in controlling the navel
orangeworm, which is one of the worst pests in the almond industry.
Through the project, the Board has been instrumental in reducing such
chemical usage, but their use has not been eliminated yet.
The record evidence does not support this proposed amendment. The
authority is currently in the order for such projects as proposed to be
conducted. In addition, the Board is currently funding projects which
are intended to reduce the use of synthetic chemicals. Record evidence
indicates that the Board wants to work with the organic almond
community to recognize them as an important faction in the industry. If
the organic almond community works with the Board and takes an active
part in the process of determining the expenditure of production
research funds, they will make their voice heard and assist the Board
in making expenditure decisions that will help to benefit the whole
almond industry.
The record evidence also supported that there may not be enough
sources of research to obtain the proposed 25 percent of the production
research funds and this proposal would be too restrictive for the
Board. Therefore, for the above reasons, the proposed amendment is not
recommended.
Material Issue Number 24
Sections 981.47 and 981.50 should be amended to require that the
Secretary shall exempt from any reserve, that part of the crop which is
sold as ``certified organic almonds'' under standards established by
the Organic Foods Act of 1990 and the California Organic Foods Act of
1990. The Board may propose regulations to assure procedures to
implement this section.
Currently, there is no requirement in the marketing order to exempt
certified organic almonds from the reserve provisions.
The proponents testified that they are proposing the exemption
because certified organic almonds are a distinct and different product
from conventional almonds. There are many laws and requirements for a
farmer to become certified as organic. First, the California Organic
Foods Act of 1990 requires that any foods sold as organic are grown
without the use of prohibited materials. Prohibited materials are all
synthetic products. No prohibited materials can be used in the soil for
at least one year prior to the season in which the crop is grown.
Handlers are also restricted from using any prohibited materials.
California law requires extensive recordkeeping by organic growers and
handlers. California law also requires that each grower and handler of
foods sold as organic must be registered annually with the State. The
State intends to strictly enforce provisions of the organic program.
Two growers have been recently fined $7,000 or more for violations. The
certification process is quite lengthy and costly.
The proponent testified at the hearing that certified almonds are a
distinct product from conventional almonds. They are sold into a
different market than conventional almonds. The price for certified
organic almonds is significantly higher, approximately 30 to 44 percent
higher than for conventional almonds. Certified organic almonds only
comprise about one-tenth of one percent of the total almond industry. A
1992 report by the University of California Cooperative Extension
Service states that, ``At present, no bulk commodity market exists for
organically grown almonds. Because of this, market fluctuations and
pricing of conventionally-grown almonds do not directly affect the
market for organically-grown almonds''. Certified almonds are sold in a
niche market to consumers whose first concern is purchasing an organic
product. If organic almonds are not available, the consumer will be
more likely to substitute another organic product instead of
conventional almonds. Many wholesalers and retailers of organic almonds
do not purchase conventional almonds.
At the hearing, the proponent testified that a reserve requirement
for certified organic almonds disrupts the market and is contrary to
the intent of the provision. The market for certified organic almonds
is chronically under-supplied. Therefore, a reserve which removes
product from the market disrupts the flow of supply to the market.
The proponent testified that organic almonds are more difficult to
store since most fumigation practices are prohibited. Although methods
have been developed to store organic almonds, the normal marketing
season of organic almonds is not as long as that for conventional
almonds. Many organic growers therefore, use cold storage which can be
quite expensive. When a reserve is implemented, handlers keep a
percentage of certified organic almonds off the market and are unable
to meet market demand. In addition, handlers have been unable to fill
buyer orders even though they have certified organic almonds in
reserve.
The proponent further testified that the proposal would have a
positive impact on small businesses since most [[Page 17481]] organic
almond growers and handlers are small businesses.
At the hearing, it was discussed that there is an extensive audit
trail from the organic grower to the handler so there would be no
confusion as to which almonds would be organic or conventional.
Testimony was also offered that if a conventional lot and certified
organic lot were commingled, the almonds could no longer be sold as
certified organic almonds. Also, containers that include certified
organic almonds have to be extensively identified.
Opponents at the hearing testified that certified organic growers
do benefit from many programs under the almond marketing order. The
reserve program is one such program that needs participation by all
members of the almond industry. By excluding organic almonds from the
reserve, a two-tiered system would be implemented creating dissension
within the industry and in the long run would act against the organic
growers' best interests by alienating them from the industry. The Board
is supportive of attempts to include the interests of organic growers
on all policy matters discussed by the Board. In the testimony by the
proponents, they indicated that many of the regulations governing
organic farming are just now being developed. The Board addressed this
issue when the 1990 reserve was established. At that time, organic
growers requested that the Board exclude or declare organic production
a reserve outlet. That request was denied by the Board. It was thought
at that time that the organic program was not fully developed and there
could be a lack of a reliable system of certification and tracking. The
opponent testified that there is now a complete system in place and
given the information the Board now knows the Board could make a
decision to use organic almonds as an outlet for reserve almonds. The
witness testified that the marketing order currently contains language
to accomplish what the organic community wants without this amendment.
The organic almond production could be evaluated on a yearly basis to
determine if certified organic almonds should be part of the reserve.
The record evidence supports the merits of this amendment. The
proponents have presented a compelling case that certified organic
almonds are unique and are sold into different markets. During a
reserve year, handlers of organic almonds are unable to supply all of
their buyers with certified organic almonds. The certified almond
growers and handlers must follow strict regulations to ensure that they
are selling certified organic almonds in the marketplace. Certified
organic almonds can be traced by a paper trail to the retail level. If
commingling occurs with non-organic almonds, they are no longer
considered certified organic. There are State and Federal laws
regulating the practices of certification of organic products. Storing
organic almonds is problematic because most fumigation practices are
prohibited. Certified organic almonds currently comprise only one-tenth
of one percent of the almond industry.
Certified organic almonds can currently be exempted from reserve
provisions by designating them as an authorized reserve outlet under an
agency agreement recommended by the Board and approved by the
Secretary. This can be done on a yearly basis when a reserve is
recommended. However, record testimony has shown that the imposition of
a reserve on certified organic handlers in any year could be
unnecessarily detrimental to this segment of the industry with no
proven benefit to the industry as a whole. Therefore, the proposed
amendment is recommended.
Material Issue Number 25
The proposed amendment to section 981.80 would have allowed the
Board to contract for periods of five years for services, goods or
other reasonable expenses.
Currently, section 981.80 specifies that the Board is authorized to
incur expenses during each crop year. The recommendation of the Board
for their expenses each year must be submitted to the Secretary on or
before August 1 of the crop year. Expenditures are then incurred on a
yearly basis.
Proponents testified at the hearing that the Board has been
handicapped in the areas of research and marketing by the inability to
enter into multi-year contracts. The Board is required to do business
on a year-to-year basis. Some contracting parties become disillusioned
because a concept may take several years to develop and implement and
they are restricted to contracting for only a year at a time. The
contracting parties may find that it is not economically feasible to
enter into a contract without a commitment of more than one year. This
often results in lost opportunities for the Board in being forced to
negotiate for a one year contract that may be more expensive and less
desirable than a contract covering more than one year.
At the hearing, the proponents stated that the California
Agricultural Statistics Service (CASS) was asked to deliver a proposal
for an acreage survey. The cost of the survey was considered to be too
high for a single year's budget. The CASS then suggested a two year
proposal in which they would survey one half the crop one year and the
other half the next year. Record evidence indicated that the Board
contracted to survey one-half this year, but will be prohibited from
committing to the project's completion. A new Board next year may
change its mind which could lead to development of a survey for one
half of the crop. This would not be a desirable use of Board's funds.
The proponents further testified that the adoption of this
amendment would have a positive economic impact. The Board does not
anticipate that all or most future business activities would take the
form of a multi-year contract. However, where needed and cost
effective, the proponents testified that the ability to enter into such
agreements should be available.
At the hearing, further discussions focused on the proposal to have
three-year terms of office for Board members and how this would affect
five-year contracts that could be in effect. Proponents testified that
this particular situation occurs everyday in businesses and
corporations where the directors that are there could very well be
turned over and not be there when the contract comes to a conclusion.
The proponents further testified that they envision that such multi-
year contracts could be used for a building lease or the development of
a new almond product.
The record evidence shows that marketing order committees have
already been given permission, on a case-by-case basis, to enter into
multi-year contracts, although such contracts are contingent on the
marketing order remaining in effect. Also, some of the Board's research
and promotion projects are currently four or five year projects.
Proponents, however, testified that these projects have been funded
only on a yearly basis. The record evidence showed that funding a
project on a year-by-year basis would allow the Board to evaluate the
progress of the project and decide if it should be continued. The
marketing order is designed to operate on an annual basis and to be
evaluated by the Secretary on an annual basis. The record evidence also
showed that the Department has given permission to marketing order
boards and committees, on a case-by-case basis, to enter into multi-
year contracts.
The Act provides that marketing order committees establish budgets
and assessment rates on a periodic basis. The marketing order requires
that the [[Page 17482]] expenses and assessment rate be established for
each crop year. This allows for evaluation by the Board and the
Secretary of Board activities on an annual basis. The Secretary is
responsible for oversight of Board activities and believes that this
proposal could limit the annual reviews as well as restrict the
activities of future Boards. It is acknowledged, however, that multi-
year contracts, in some instances, could benefit the Board by allowing
for long-range, cost-effective planning. It is preferred that these
situations be handled on a case-by-case basis.
Accordingly, the record evidence does not support the amendment for
the Board to be allowed to enter into multi-year contracts. Therefore,
this proposed amendment is not recommended.
Material Issue Number 26
Two proposed amendments to section 981.90 would require that
continuance referenda be conducted. One proposal would have required
that continuance referenda be conducted every five years beginning July
31, 1999, to determine grower support for continuation of the marketing
order for almonds. Another proposal would have required that
continuance referenda be conducted every four years with the first to
be held in 1996.
Currently, there is no provision in the marketing order that
provides for periodic continuance referenda.
The proponents for five-year referenda testified that the growers
should have the ability to vote for continuance or termination of the
marketing order. These referenda would allow growers to have a voice as
to the value of the almond marketing order. The proponents testified
that they realize that circumstances change over time, and therefore
believe that a time period of five years would allow for a timely
debate as to the merits of continuing or terminating the marketing
order.
The proponents' proposal for five-year referenda also contained
language regarding termination of the marketing order that is already
contained in the order. The proponents testified that they would agree
to the criteria which the Secretary may use in determining whether the
marketing order should continue.
The order currently provides that the Secretary shall terminate the
order if a majority of all growers favor termination and such majority
produced more than 50 percent of the almonds for market within the
State of California. Since less than 50 percent of all growers usually
participate in a referendum, it is difficult to determine grower
support for termination of an order.
Another way of assessing whether growers favor the continuation of
an order would be to hold a continuance referendum using the same
criteria as set forth in section 8c(8) of the Act with respect to
producer approval of the issuance of a marketing agreement and order.
This section of the Act requires approval by two-thirds of the
producers voting in the referendum or by producers who have produced
two-thirds of the volume of the production voted during a
representative period. This is a reasonable and appropriate basis for
determining whether almond growers favor continuation of the order.
In the event that the requisite majority of growers, by number or
volume of production represented in the referendum, do not approve
continuation of the order, the Secretary may consider termination of
the order but would not be required to terminate. In evaluating the
merits of termination, the Secretary would not only consider the
results of the continuance referendum, but also would consider all
other relevant information concerning the operation of the order and
the relative benefits and disadvantages to producers, handlers, and
consumers in order to determine whether continued operation of the
order would tend to effectuate the declared policy of the Act. In this
regard, the Secretary may solicit input from the public through
meetings, press releases, or any other means. The proponents testified
at the hearing that in evaluating the merits of continuing the order,
they would like to see the Secretary not only consider the results of
the continuance referendum but also consider information relative to
the operation of the marketing order.
Proponents of the proposal for four-year continuance referenda
testified that a vote for continuance should be held in 1996. They
testified that two years of operating under the new amendments should
be adequate time for the growers to make a well-informed decision as to
whether the program is effective.
Proponents in favor of the four-year referenda proposal testified
that because of the lack of referenda in the past (the only continuance
referendum on the almond marketing order was conducted in 1989), it is
appropriate to have a continuance referendum every four years.
Based on evidence and testimony submitted at the hearing relative
to periodic referenda, the order should be amended to require that such
referenda be conducted.
It is USDA's preference to provide for periodic referenda at least
every six years to allow growers an opportunity to indicate their
support for or rejection of the order. The record evidence demonstrates
that the proposal for referenda every five years is reasonable and has
widespread industry support. A referendum every five years would allow
growers an opportunity to vote in favor or in opposition to the order
as changes occur in the industry yet would not be wasteful of the
Board's resources. For the above reasons, the order should be amended
to provide for periodic referenda every five years beginning two years
from the year these amendments are finalized. Conducting a continuance
referendum two years after the implementation of the proposed
amendments would allow the industry sufficient time to evaluate the new
amendments and determine if the marketing order should continue in
effect. Therefore, the proposed amendment, as modified, is recommended.
Material Issue Number 27
Sections 981.51, 981.54, 981.55, and 981.66, which relate to
certain reserve provisions, should not be deleted from the marketing
order. In addition, Secs. 981.52 and 981.67, also relating to the
reserve, should not be amended as proposed. Section 981.55 should be
amended to clarify that handlers may be authorized to transfer reserve
almonds to another handler.
Extensive record testimony indicated this proposal had three basic
purposes. One purpose was to eliminate authority in the marketing order
that requires reserve almonds to be sold in secondary or market
development outlets. Another purpose was to allow handlers to sell
their reserve almonds and the accompanying reserve obligation to
another handler. The remainder of the proposal was to make conforming
changes in the order language to coincide with the two aforementioned
purposes.
The proponent of this proposal testified that reserve almonds
should not be required to be sold to secondary outlets (where the
return is significantly lower). The proponent believed that this was
not economically sound, and explained that, if reserves are
established, the reserve almonds should ultimately be sold in normal
competitive outlets at some point in the future. The proponent
testified that reserve almonds could be carried forward for several
years to augment short supplies in the event of a crop failure.
Opponent's testimony indicated that the option of having reserves
in effect for consecutive years already exists in [[Page 17483]] the
marketing order. The proposal would maintain that option, but would
eliminate the order's flexibility to require disposition in non-
competitive outlets. The proponent failed to offer any economic
analysis in support of carrying reserve product forward indefinitely,
as opposed to diverting the product.
The proponent also testified that the reserve program had been
manipulated in the past by the Board in that Board members were aware
of Board decisions well in advance of the rest of the industry, thus,
placing them at an advantage over the remainder of the industry.
No evidence was presented at the hearing indicating that Board
members are aware of final Board recommendations prior to the voting
process. To the contrary, it was testified that many Board members act
independently. Further, Board members are elected through a democratic
process and, therefore, risk not being renominated if they do not
fairly represent their constituency.
The proponent testified that handlers should be able to sell their
reserve almonds and accompanying reserve obligation to other handlers.
A large number of handlers in the industry handle a relatively small
proportion of the crop and operate for only a few months each year.
Other larger handlers operate on a year-round basis. The proponent
testified that the smaller handlers, who would normally cease their
handling operation, are forced to maintain, at an additional cost to
them, the required inventory in good condition in storage. If these
small handlers do not want to incur the additional costs, the proponent
stated the only other option available is disposition to approved
reserve outlets at significantly lower prices. The proponent stated
that handlers that dispose of their reserve almonds in secondary
outlets could be financially disadvantaged in the event the reserve is
released to the saleable category after their disposition.
Opponents stated that the proposal contained several provisions and
eliminations of provisions that appeared to be in conflict with one
another. Therefore, it was not clearly understood what exactly the
proposal in its entirety was attempting to accomplish. Additional
rationale against the proposal was a general difference in philosophy
regarding eliminating tools of the marketing order currently available
to the industry.
As previously stated, the proposal contained three basic purposes.
The first purpose involved eliminating the authority to require reserve
almonds to be sold in secondary outlets. We agree with the position
that there is authority in the marketing order to release all of the
reserve, making it unnecessary to sell reserve almonds in non-
competitive outlets, if recommended by the Board. Removing the Board's
authority to recommend to the Secretary that reserve almonds be sold in
these outlets would remove an option available to the Board that may be
considered necessary and in the best interest of the industry under
certain circumstances. It is determined that the Board should retain
flexibility in this regard and that this portion of the proposal would
place an unnecessary restriction on the Board in making recommendations
to the Secretary regarding the reserve. For this reason, this part of
the proposal is not recommended.
Record evidence supports the merits of the second portion of this
proposal dealing with selling reserve almonds and transferring reserve
obligations to another handler. The overall intent of the reserve
program could still be met as long as the same total quantity of
product was held off the market. Providing handlers the additional
authority to transfer any or all of their reserve obligations to other
handlers in the industry could help facilitate the operation of the
reserve program by providing more flexibility. In order to ensure such
a provision is administered properly, it would be necessary for the
Board, with the approval of the Secretary, to implement regulations to
effectuate such a provision.
The third purpose of the proposal involved eliminating certain
sections of the order to correspond with the other purposes of this
proposal. However, it is not necessary to delete these sections of the
marketing order as proposed to accomplish that portion of the proposal
that is being accepted and recommended herein.
For the aforementioned reasons, this proposed amendment is
recommended, in part, by modifying Sec. 981.55 to provide the authority
for the Board, with the approval of the Secretary, to allow handlers to
transfer their reserve obligation to other handlers.
Material Issue Number 28
The proposed amendment to Sec. 981.50 would have required that,
when a reserve is established, the first 250,000 pounds of almonds
handled by a handler would be exempt from the reserve percentage. In
addition, the exemption would not apply to a handler who has not been a
handler and paid assessments for each of the two previous crop years
and/or to one who has been associated or under contract with or is a
director, controller, shareholder, owner, or partner in any other
handler facility taking advantage of the exemption.
Currently, Sec. 981.50 provides that each handler shall withhold
from handling a quantity of almonds equal to the reserve percentage of
the kernelweight of all almonds such handler receives for his/her own
account during the crop year. There is no quantity reserve exemption in
the marketing order at this time.
The proponent testified that the purpose of this amendment is to
benefit small handlers. A small handler's cost per pound to operate is
much greater than that of a larger handler. The small handler, defined
as one who handles less than 250,000 pounds annually, would probably
close such facility after the handling season, but must remain open to
maintain the reserve almonds. Record evidence indicated that small
handlers that handle less than 250,000 pounds would be treated
differently since there would be a differential impact of reserve
requirements on such handlers.
The proponent testified that the conditions for the exemption are
there to prevent people from becoming handlers during the year of
regulation to take advantage of the 250,000 pound reserve exemption.
The condition for the exemption would prevent people from anticipating
that a reserve is going to be established.
At the hearing, it was discussed that possibly a creative attorney
could breakdown a single business into separate entities so that each
one would handle less than 250,000 pounds to take advantage of the
exemption. However, the proponent testified that he did not see that as
a problem under this proposal because of the criteria for eligibility
written into the proposal.
Opponents testified that the proposal would create two classes of
handlers, those who have to participate in the reserve and those who do
not. The proposal is also based on an arbitrary level of 250,000
pounds. Record evidence stated that the strength of the marketing order
is that all members of the industry participate in the order and the
rules and regulations apply to everyone across the board. The exemption
would only serve to cut the industry into very small segments that
would dilute the strength of the order. This proposal would create an
opportunity for those inclined to take advantage of any loopholes and
benefit from them. Opponents further testified that by eliminating a
proportion of handlers from the reserve, the burden
[[Page 17484]] would fall on fewer handlers causing them financial
hardship.
The record evidence indicated that the Act provides that reserve
provisions should be applied uniformly throughout the entire industry.
While all handlers would have the same exemption under this proposal,
those handlers that handled over 250,000 pounds would be regulated and
those who handled less than that amount would not be regulated. The
Department disagrees with the proponent's assertion that administering
this proposal would not be problematic. It would be difficult to
implement this proposal and develop equitable regulations covering all
situations that could occur. The record evidence also indicated that
this proposal could potentially have an effect on the market if there
were many handlers that handled less than 250,000 pounds of almonds.
This in turn would place more of a burden on those regulated handlers
that handled more than 250,000 pounds of almonds.
Accordingly, the record evidence does not support the proposal to
require that when a reserve is established, the first 250,000 pounds
handled by a handler would be exempt from the reserve percentage.
Therefore, this proposed amendment is not recommended.
Material Issue Number 29
The proposed amendment to Sec. 981.71 would have required incoming
inspections to be conducted no later than the last day of February
during the then current crop year.
Section 981.71, which provides for furnishing statistical
information to the Board for purposes of establishing the reserve
obligation, was suspended indefinitely in 1975. Section 981.42 provides
that handlers shall obtain incoming inspection through the Federal-
State inspection service to determine the amount of inedible kernels in
each variety and report the determination to the Board.
A proponent at the hearing testified that the incoming inspection
is needed in order to determine the size of the industry's total crop.
The industry needs to know no later than the end of February of each
year, the quantity of almonds received by handlers for election
purposes, Board statistical use, reserve calculations, and assessment
calculations. The proponent testified that the longer inspection is
delayed, the longer payment of assessments is also delayed. If the
Board is going to receive the assessment money, they would prefer to
receive it earlier. If a handler receives almonds after the February
date, the handler should assume a penalty or completely reject the
almonds for delivery.
Statistics presented at the hearing indicate, however, that since
1980 almonds received by handlers through the month of February in any
given year have exceeded 97 percent of the total almonds received for
the entire crop year. In most years, the receipts through February
exceeded 99 percent of the total. Based on this information, there
would be no appreciable difference in the estimated crop size at that
point of the season if all almonds were required to be inspected by
February 28 of each year. In addition, there would be no appreciable
difference in handlers' share of the crop handled for election
purposes.
Handlers are currently required to report to the Board all almonds
received for their account during several prescribed periods. This
information is combined with other information reported to the Board to
determine handlers' assessment and reserve obligations. Inspection
certificates are used to verify information reported to the Board and
for determining inedible obligations. They are not necessary for the
Board to make assessment billings and determine reserve obligations.
If implemented, this proposal may subject handlers to civil or
criminal penalties for having product inspected after February 28. It
would also have the effect of dictating to growers when they have to
sell and deliver their product to a handler. It is conceivable that for
financial reasons, a grower may choose to store his or her product
until late in the season before selling it to a handler. This proposed
amendment would, in effect, prohibit such a practice.
While the proposed amendment could, in some instances, serve to
facilitate the operations of the Board, the positive aspects of such a
proposal are outweighed by the negative. Regulating the industry in
this regard would place an undue burden on both growers and handlers
which is not necessary for the functioning and administration of the
program.
For the reasons stated above, this proposed amendment is not
recommended.
Rulings on Briefs of Interested Persons
Briefs, proposed findings and conclusions, and the evidence in the
record were considered in making the findings and conclusions set forth
in this recommended decision. To the extent that the suggested findings
and conclusions filed by interested persons are inconsistent with the
findings and conclusions of this recommended decision, the requests to
make such findings or to reach such conclusions are denied.
General Findings
(1) The findings hereinafter set forth are supplementary to the
previous findings and determinations which were made in connection with
the issuance of the marketing agreement and order and each previously
issued amendment thereto. Except insofar as such findings and
determinations may be in conflict with the findings and determinations
set forth herein, all of the said prior findings and determinations are
hereby ratified and affirmed;
(2) The marketing agreement and order, as amended, and as hereby
proposed to be further amended, and all of the terms and conditions
thereof, would tend to effectuate the declared policy of the Act;
(3) The marketing agreement and order, as amended, and as hereby
proposed to be further amended, regulate the handling of almonds grown
in California in the same manner as, and are applicable only to,
persons in the respective classes of commercial and industrial activity
specified in the marketing agreement and order upon which a hearing has
been held;
(4) The marketing agreement and order, as amended, and as hereby
proposed to be further amended, are limited in their application to the
smallest regional production area which is practicable, consistent with
carrying out the declared policy of the Act, and the issuance of
several orders applicable to subdivision of the production area would
not effectively carry out the declared policy of the Act; and
(5) All handling of almonds grown in California as defined in the
marketing agreement and order, as amended, and as hereby proposed to be
further amended, is in the current of interstate or foreign commerce or
directly burdens, obstructs, or affects such commerce.
List of Subjects in 7 CFR Part 981
Almonds, Marketing agreements, Nuts, Reporting and recordkeeping
requirements.
Recommended Further Amendment of the Marketing Agreement and Order
For the reasons set out in the preamble, 7 CFR part 981 is proposed
to be amended as follows:
PART 981--ALMONDS GROWN IN CALIFORNIA
1. The authority citation for 7 CFR part 981 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
[[Page 17485]] 2. Section 981.14 is revised to read as follows:
Sec. 981.14 Cooperative handler.
Cooperative handler means any handler as defined in Sec. 981.13 of
this subpart which qualifies for treatment as a nonprofit cooperative
association as defined in Section 54001, et seq. of the California Food
and Agricultural Code. The Board, with the approval of the Secretary,
may modify this definition, if necessary.
3. Section 981.16 is revised to read as follows:
Sec. 981.16 To handle.
To handle means to use almonds commercially of own production or to
sell, consign, transport, ship (except as a common carrier of almonds
owned by another) or in any other way to put almonds grown in the area
of production into any channel of trade for human consumption
worldwide, either within the area of production or by transfer from the
area of production to points outside or by receipt as first receiver at
any point of entry in the United States or Puerto Rico of almonds grown
in the area of production, exported therefrom and submitted for reentry
or which are reentered free of duty. However, sales or deliveries by a
grower to handlers, hullers or other processors within the area of
production shall not, in itself, be considered as handling by a grower.
4. Section 981.18 is amended by removing the word ``and'' at the
end of paragraph (b); removing the period and adding ``, and'' at the
end of paragraph (c); and adding a new paragraph (d) to read as
follows:
Sec. 981.18 Settlement weight.
* * * * *
(d) For inedible kernels as defined in Sec. 981.8.
5. Section 981.19 is revised to read as follows:
Sec. 981.19 Crop year.
Crop year means the twelve month period from August 1 to the
following July 31, inclusive. Any new crop almonds harvested or
received prior to August 1 will be applied to the next crop year for
marketing order purposes. The first crop year after the implementation
of this amendment shall be a 13-month period.
6. Section 981.21 is revised to read as follows:
Sec. 981.21 Trade demand.
Trade demand means the quantity of almonds (kernelweight basis)
which commercial distributors and users such as the wholesale, chain
store, confectionery, bakery, ice cream, and nut salting trades will
acquire from all handlers during a crop year for distribution
worldwide.
7. Sections 981.30 and 981.31 are revised to read as follows:
Sec. 981.30 Establishment.
The Almond Board shall consist of twelve members, each with an
alternate member.
Sec. 981.31 Membership representation.
Membership of the Board will be determined in the following manner:
(a) Three members and an alternate for each member shall be
selected from nominees submitted by each of the following groups
designated in paragraphs (a)(1) and (2) of this section, or from among
other qualified persons belonging to such groups:
(1) Those growers who market their almonds through cooperative
handlers; and
(2) Those growers who market their almonds through other than
cooperative handlers.
(b) Two members and an alternate for each member shall be selected
from nominees submitted by each of the following groups designated in
paragraphs (b)(1) and (2) of this section, or from among other
qualified persons belonging to such groups:
(1) Cooperative handlers; and
(2) All handlers, other than cooperative handlers.
(c) One member and an alternate shall be selected from nominees
submitted by each of the following groups designated in paragraphs
(c)(1) and (2) of this section, or from among other qualified persons
belonging to such groups:
(1) The group of cooperative handlers or the group of handlers
other than cooperative handlers, whichever received for their account
more than 50 percent of the almonds delivered by all growers as
determined by December 31 of the then current crop year; and
(2) Those growers whose almonds were marketed through the handler
group identified in paragraph (c)(1) of this section.
(d) The Secretary, upon recommendation of the Board, or other
information, may reapportion within the 12-member Board, the number of
grower members or handler members, or both, of any group listed in
Sec. 981.31 (a) through (c), to be nominated pursuant to Sec. 981.32.
Any such change shall be based, insofar as practicable, upon the
proportionate amounts of almonds handled within any group.
8. Section 981.32 is amended by revising paragraph (a) and amending
paragraph (b)(2) by removing the date ``March 31'' and adding in its
place the date ``December 31'' to read as follows:
Sec. 981.32 Nominations.
(a) Method. (1) Each year the terms of office of three of the
members elected pursuant to Section 981.31(a) and (b) shall expire,
except every third year when the term of office for four of those
members shall expire. Nominees for each respective member and alternate
member shall be chosen by ballot delivered to the Board. Nominees
chosen by the Board in this manner shall be submitted by the Board to
the Secretary on or before February 20 of each year together with such
information as the Secretary may require. If a nomination for any Board
member or alternate is not received by the Secretary on or before
February 20, the Secretary may select such member or alternate from
persons belonging to the group to be represented without nomination.
The Board shall mail to all handlers and growers, other than the
cooperative(s) of record, the required ballots with all necessary
voting information including the names of incumbents willing to accept
renomination, and, to such growers, the name of any person proposed for
nomination in a petition signed by at least 15 such growers and filed
with the Board on or before January 20. Distribution of ballots shall
be announced by press release, furnishing pertinent information on
balloting, issued by the Board through newspapers and other
publications having general circulation in the almond producing areas.
(2) Nominees for the positions described in Sec. 981.31(c) shall be
handled in the same manner as described in paragraph (a)(1) of this
section except that those terms of office shall expire annually.
* * * * *
9. Section 981.33 is revised to read as follows:
Sec. 981.33 Selection and term of office.
(a) Members and their respective alternates for positions open on
the Board shall be selected by the Secretary from persons nominated
pursuant to Sec. 981.32, or, at the discretion of the Secretary, from
other qualified persons, for a term of office beginning March 1.
Members and alternates shall continue to serve until their respective
successors are selected and qualified.
(b) The term of office of members of the Board shall be for a
period of three years beginning on March 1 of the years selected except
where otherwise provided. However, for the initial ten members of the
Board selected pursuant [[Page 17486]] to this section and to
paragraphs (a) and (b) of Sec. 981.31, three members shall serve for a
term of one year; three members shall serve for a term of two years;
and four members shall serve for a term of three years. For the initial
terms of office, at the time of nomination under Sec. 981.32, the Board
shall make this designation by lot. The term of office for the two
members selected under paragraph (c) of Sec. 981.31 shall always be for
a period of one year.
(c) Board members may serve for a total of six consecutive years.
Members who have served for six consecutive years must leave the Board
for at least one year before becoming eligible to serve again. A person
who has served less than six consecutive years on the Board may not be
nominated to a new three year term if his or her total consecutive
years on the Board at the end of that new term would exceed six years.
This limitation on tenure shall not include service on the Board prior
to implementation of this amendment and shall not apply to alternate
members.
10. Section 981.34 is revised to read as follows:
Sec. 981.34 Qualification and acceptance.
(a) Any person to be selected as a member or alternate of the Board
shall, prior to such selection, qualify by providing such background
information as necessary and by advising the Secretary that he/she
agrees to serve in the position for which nominated. Grower members and
alternates shall be growers or employees of growers, and handler
members and alternates shall be handlers or employees of handlers. In
the event any member or alternate ceases to be qualified for the
position for which selected, that position shall be deemed vacant.
(b) The Board, with approval of the Secretary, may establish
additional eligibility requirements for grower members on the Board.
11. Section 981.40 is amended by revising paragraphs (b) and (c)
and amending paragraph (e) by removing the word ``seven'' and adding in
its place the word ``eight'' to read as follows:
Sec. 981.40 Procedure.
* * * * *
(b) Quorum. The presence of eight members shall be required to
constitute a quorum. All decisions of the Board shall be as follows
except where otherwise specifically provided: 8 or 9 members present, 6
votes; 10 members present, 7 votes; 11 or 12 members present, 8 votes.
(c) Voting by mail, telegram or fax. The Board may vote by mail,
telegram or fax upon written notice to all members, or alternates
acting in their place, including in the notice a statement of a
reasonable time, not to exceed 10 days, in which a vote by mail,
telegram or fax must be received by the Board for counting. Voting by
mail, telegram or fax shall not be permitted at any assembled meeting
of the Board. When a proposition is submitted for vote by mail,
telegram or fax, at least ten members of the Board must vote in favor
of its passage or the proposition shall be defeated.
* * * * *
12. In Sec. 981.41, paragraph (c) is amended by removing the colon
and all text following the words ``15 percent'' in the last sentence
and adding in its place a period and by amending paragraph (a) by
adding a sentence at the end of the paragraph to read as follows:
Sec. 981.41 Research and development.
(a) * * * Notwithstanding the foregoing, certified organic almonds
may be exempt from assessments for marketing promotion, including paid
advertising, upon recommendation of the Board and approval of the
Secretary.
* * * * *
13. Section 981.47 is amended by designating the existing paragraph
as (a), removing the words ``either domestic or'' in the third sentence
of paragraph (a), and adding a new paragraph (b) to read as follows:
Sec. 981.47 Method of establishing salable and reserve percentages.
* * * * *
(b) Notwithstanding the provisions of paragraph (a) of this
section, the Secretary shall exempt from any reserve that is
established that part of the crop which is sold as ``certified
organic'' under standards established by the Organic Foods Production
Act of 1990, (7 U.S.C. 2101 et seq.) and the California Organic Foods
Act of 1990, as amended. The Board may propose regulations to assure
procedures to implement this section.
14. In Sec. 981.49, the introductory paragraph is amended by
removing the word ``six'' and adding in its place the word ``eight'',
by removing ``; and'' in paragraph (e) and adding a period in its
place, by adding ``and'' at the end of paragraph (d); by removing
paragraph (f) and by revising paragraph (b) to read as follows:
Sec. 981.49 Board estimates and recommendations.
* * * * *
(b) The estimated handler carryover and the estimated reserve
inventory as of July 31;
* * * * *
Sec. 981.50 [Amended]
15. Amend Sec. 981.50 by adding after the words ``into oil'', the
words ``or sold as certified organic.''
16. Amend Sec. 981.55 by designating the existing paragraph as (a)
and adding a new paragraph (b) to read as follows:
Sec. 981.55 Interhandler transfers.
* * * * *
(b) When saleable and reserve percentages are in effect, any
handler may transfer reserve withholding obligation to other handlers.
Terms and conditions implementing this provision must be recommended by
the Board and approved by the Secretary.
17. Section 981.60 is amended by revising paragraph (b) to read as
follows:
Sec. 981.60 Determination of kernel weight.
* * * * *
(b) Almonds for which settlement is made on unshelled weight. The
settlement weight for unshelled almonds shall be determined on the
basis of representative samples of unshelled almonds reduced to shelled
weight.
18. Section 981.61 is amended by revising the last sentence to read
as follows:
Sec. 981.61 Redetermination of kernel weight.
* * * Weights used in such computations for various classifications
of almonds shall be:
(a) For unshelled almonds, the kernelweight based on representative
samples reduced to shelled weight;
(b) For shelled almonds, the net weight; and
(c) For shelled almonds used in production of almond products, the
net weight of such almonds.
Sec. 981.62 [Removed]
19. Section 981.62 is removed.
Sec. 981.66 [Amended]
20. Section 981.66 is amended by removing paragraphs (b) and (d),
redesignating paragraph (c) as paragraph (b), redesignating paragraph
(e) as paragraph (c), redesignating paragraphs (f) and (g) as
paragraphs (d) and (e), and by amending newly designated paragraph (c)
by removing all references to the date ``September 1'' and adding in
each place ``December 31''.
Sec. 981.67 [Amended]
21. Section 981.67 is amended by removing all references to the
date ``September 1'' and adding in each place ``December 31''.
22. Section 981.70 is amended by revising the first sentence to
read as follows: [[Page 17487]]
Sec. 981.70 Records and verification.
Each handler shall keep records which will clearly show the details
of his or her receipts of almonds, withholdings, sales, shipments,
inventories, reserve disposition, advertising and promotion activities,
as well as other pertinent information regarding his or her operation
pursuant to the provisions of this part: Provided, that, such records
shall be kept in the State of California. * * *
23. A new Sec. 981.76 is added before the undesignated center
heading ``Expenses and Assessments'' to read as follows:
Sec. 981.76 Handler List of Growers.
No later than December 31 of each crop year, each handler other
than a cooperative handler (hereinafter, referred to as independent
handler) governed by this subpart shall, upon request, submit to the
Board a complete list of growers who have delivered almonds to such
independent handler during that crop year.
24. Section 981.81 is amended by adding a new paragraph (e) to read
as follows:
Sec. 981.81 Assessment.
* * * * *
(e) Any assessment not paid by a handler within a period of time
prescribed by the Board may be subject to an interest or late payment
charge or both. The period of time, rate of interest and late payment
charge shall be as recommended by the Board and approved by the
Secretary. Subsequent to such approval, all assessments not paid within
the prescribed period of time shall be subject to an interest or late
payment charge or both.
25. Section 981.90 is amended redesignating paragraph (b)(2) and
(b)(3) as paragraphs (b)(3) and (b)(4) and by amending newly designated
paragraph (b)(3) by removing the date ``June 1'' and adding in its
place ``July 1'' and adding a new (b)(2), to read as follows:
Sec. 981.90 Effective time, suspension, or termination.
* * * * *
(b) * * *
(2) The Secretary shall conduct a referendum as soon as practical
after the end of the fiscal year ending two years after implementation
of this amendment, and at such time every fifth year thereafter, to
ascertain whether continuation of the order is favored by growers who
have been engaged in the production of almonds for market within the
State of California during the current crop year.
* * * * *
Sec. 981.467 [Amended]
26. In Sec. 981.467, paragraph (a) is amended by removing the date
``July 1'' and adding in its place ``August 1'' and by removing the
words ``export or'' and ``or both,'' from the second sentence in
paragraph (a).
Sec. 981.462 [Amended]
27. In Sec. 981.472, paragraph (a) is amended by removing the dates
``July 1 to August 31'' and adding in its place ``August 1 to August
31.''
Dated: March 22, 1995.
Lon Hatamiya,
Administrator.
[FR Doc. 95-8205 Filed 4-5-95; 8:45 am]
BILLING CODE 3410-02-P